Eurasian Development Bank: Belarus to face debt crisis

It will scarcely be possible to forget about economic crises in the nearest years.

A debt crisis takes a long time: from 5 to 10 years are needed for the crisis to end and strong stabilization mechanisms to be created, experts from the Eurasian Development Bank (EDB) say. National economies of CIS (the Commonwealth of Independent States) countries are not protected from risks of unfavourable development. The EDB analyzes the risks of all countries of the region and possible scenarios of the global crisis development taking into account national peculiarities of CIS member states' fiscal systems, TUT.by reports.

Governments of the CIS countries carried out a countercyclical policy amid the crisis in 2009-2010 curbing the growth of budget expenditures in the upswing to prevent overheating of the economy and increasing budget spending in the downturn to support the domestic demand. “Belarus was an exception. The country conducted a mild policy with a clear tendency to stimulate the overheating economy in the  pre-election year of 2010,” experts note.

The outcome is known for everyone: a grave balance-of-payments and currency crisis in 2011 as a result of overstimulating the domestic demand. “After the devaluation of the national currency, government's measures in spring and summer and urgent aid from the Anticrisis Fund of the EurAsEc and other donors made a significant stabilizing effect on the economy allowing to stop the slump of the national currency and slow down price growth in early 2012,” experts say.

The country however failed to draw right conclusions from the crisis. A comparison of the current situation in the world and the CIS countries with the situation before the 2008 crisis shows that national economies have not increased their resistance to possible negative events in the last three years, the EDB marks. “Absence of economy overheating in the world economy and economies of the region can be called among fundamental differences. Another difference is that the sovereign debt crises of the eurozone is less complicated in comparison with the mortgage crisis  of 2007-2008,” experts note.

A debt issue may be a problem for some countries. Though from the point of view of the size of  the government debt,  the situation in the region remains rather stable, but comparison of the size of the national debt and the size of incomes of the public administration sector allows to say about a threat to lose stability for Kyrgyzstan, Armenia and Belarus in case of a new wave of crisis.

Experts again state the fact that Belarus failed to finish market and public administration reforms.

Belarus seems to have no serious problems in 2012, but it occurred not due to reforms, but due to low prices of imported energy within the Common Economic Space and an opportunity to import oil from Russia for domestic consumption on a duty-free basis that eased pressure on government spending.

A significant increase in wages and pensions, keeping state support for residential development and further backing utility rates  provided for by the development programme for 2011-2015 give experts cause to concern.

The Eurasian Development Bank recommends Belarus and other countries with similar economic models to create reserve funds to remedy consequences of crises.