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Iosub: Rush For $500 May Lead To Devastating Consequences

Iosub: Rush For $500 May Lead To Devastating Consequences
VADZIM IOSUB

According to the economist, the authorities may start printing empty money to achieve this goal.

During his visit to Mahilyou region, Lukashenka ordered to raise the average salary up to 500 dollars provided that there will be a corresponding growth in labor productivity.

"Get ready to make the average salary equal to $500next year, – Lukashenka instructed. – I'm not saying that we should pay unearned money. In no case. Otherwise, we will return to where we had started two years ago. We need to stimulate, to push the leaders of private and public enterprises to ensure that we make the salaries approach 500 dollars."

"500 dollars in 2017 are unattainable"

This is what the senior analyst of Alpari Vadzim Iosub thinks:

– The most important thing in Lukashenka's statement is his words about the corresponding growth of labor productivity. Let me remind you that labor productivity is production output per worker. Considering the current dollar equivalent of the salaries, $ 500 is almost half times higher than the current average salary. Therefore, the labor productivity should grow 1.5 times to earn 500 dollars. It means that the production should grow by half too, and it shouldn't be production for a warehouse, the products should be sold.

The second way to solve the problem – to reduce employment while preserving the same level of production. The combination of the two methods is possible.

It's not likely that the production will grow by half within the next year while preserving the sales. The reduction of employment by half also seems unlikely to happen ; though the cuts are unavoidable, it is not likely that the authorities would dare such mass reductions.

I think that the salary of $ 500 can hardly be achieved by natural means due to growth of labor productivity in the following year.

– However, the cherished goal can be achieved by another way – by printing the money.

– If the authorities start printing empty money to achieve their goal, the consequences will be devastating. It is possible to raise wages in dollar equivalent to $ 500 for a short time, but then the currency exchange rates will inevitably collapse and 500 dollars will not be equal to 500 dollars.

A certain aspect at which you should pay your attention is the efforts that the National Bank and the government take to de-dollarization the economy – they once again set goals for building the salaries in US dollars, which looks strange at best.

– Will the printing of empty money lead to a collapse of economy similar to the one that happened in 2011?

– There was a collapse of economy in Belarus in 2009, a series of collapses in 2011, one more collapse in late 2014. The rush for a salary of $ 500 was accompanied by a series of economic collapses. It's not even the economic collapse itself that is terrible, although there's nothing pleasant in it, but the preservation of the goal while printing of empty money regularly, which leads to continuous series of collapses. We managed to stop the collapses in the last year or two exactly due to the abandonment of the goal "everyone gets $ 500", – bdg.by quotes Iosub.

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