IMF warns Minsk against crisis threat

Economic situation in Belarus causes a deep concern.

The assessment comes from a press-release by the International Monetary Fund, published on 17 December. The organization’s board of directors predicts serious problems in Belarusian economy in the short-term perspective.

“The economic growth has been remaining slow in Belarus in the first nine months of 2013, having accounted for merely 1.1% (calculated yearly rate), while the significant salary increase and rapid growth of directed crediting contributed to worsening external imbalances. The inflation decreased in the first half year, but again grew in September and remains in double digits.

As a consequence of the combination of significant growth of domestic demand, slowed growth rates of the Russian economy and decreased competitiveness of Belarusian goods the balance of the current account worsened, and in the first half year the negative balance reached 9.5% of GDP. The reserves decreased and in October covered approximately 1.7 months of imports”, - the document says.

IMF experts point out that Belarusian banks experience pressure, including due to acute lack of financing in Belarusian roubles, caused by growing population’s preferences to save money in foreign currencies. The growth of foreign currency crediting significantly slowed down in 2013, but remained high at the level of approximately 20% in January-September. Apart from that the dollarization of credits kept growing, borrowings in dollars reached 48% of the total amount of loans in September.

The organization’s predictions foresees that slow growth rates will remain and the situation with the balance of payments will be difficult in short-term.

“The risks are notable shifted towards the worsening of the situation. In particular, further worsening of the current account’s balance or the financial account may increase pressure on reserves and Belarusian rouble. The risks in the banking realm also remain one of the reasons to be concerned, including due to still fast growing foreign currency crediting”, - IMF experts state.

Having pointed out the emerging threats for the macroeconomic stability and the shortening of buffer reserves, the organization’s executive directors recommended official institutions to take decisive measures in terms of economic policies for mitigating the risks in an orderly manner. In particular, the director agreed that for regaining internal and external stability and improving mid-term growth perspectives the toughening of macroeconomic policies is needed as well as deep structural reforms.

According to the IMF, it is necessary “to suspend raising salaries throughout 2014, and dramatically reduce directive crediting with its complete gradual elimination in the mid-term”.