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Leu Marholin: Serious Public Unrest Needed to Take Reforms

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Leu Marholin: Serious Public Unrest Needed to Take Reforms

Belarusian officials hope to "sit out" the crisis.

In the context of "state capitalism" authorities have enough levers including robbery of its own people, swindling of loans, and the distribution of the burden to profitable enterprises.

Economist Leu Marholin shared his opinion with EuroBelarus.

- According the National Statistics Committee, last year real money income of the Belarusians fell by 7%. Does the official statistics bear to reality?

- Well, it hardly bears to reality. I have not conducted the statistical analysis, but it is enough to go to a store and compare prices and a real wage. But the very fact of acceptance of decline of real income is a progress. Lukashenka himself sees improvements and impressive ones.

- Personal income is a mirror reflection of the situation in the economy. Main revenue of the Belarusian budget is formed by exports of oil products and potash fertilizers. It fell by more than $1.5 billion in January-May, sales of MAZ in the Russian market fell by 23.4%. There is a decline in all spheres. How long can such economy stand without foreign investments?

- It may have no edges. The economy cannot collapse at once. In most cases it takes a gradual decline and the process may last long enough until the North Korea condition.

Another thing is that how long the Belarusians are willing to tolerate crisis, drop in revenue. Amid open borders it is hard to say. The most intelligent, sensible, the most skilled in the labor market Belarusians will seek a better life in other countries, thereby the social tension will be reduced.

- Head of Kosht Urady project Uladzimir Kavalkin calculated that if the Belarusian government did not solve the problem with loss-making enterprises and those which were on the verge in the next two months, Belarus would suffer a large-scale financial crisis. How likely is it possible?

- A large-scale financial crisis means the collapse: when you do not pay and are not paid in return, even if your production is in demand. It would seem if one does not pay - do not sell. But such decisions are usually taken by higher officials.

I do not think that the collapse occurs in three months. There are extraordinary decisions in Belarus which have actively been practiced by the authorities. The government usually practices respite for previous loans and payment for energy in order not to increase the money supply and do not provide loans. So, it shifts the burden on shoulders of profitable enterprises. Perhaps, new ways will be found.

The market economy is as simple as ABC: if there is no effective demand, the economy collapses in a few months. The economy of our country can stand for a while. Therefore, I would keep an accurate date and diagnosis open.

- The Eurasian Development Bank (EDB) predicts a prolonged stagnation for the Belarusian economy. Analysts predict a slowdown in Belarus' GDP up to minus 1.9% in 2016. In subsequent years a gradual recovery of the Belarusian economy is foreseen - in 2018 GDP growth will allegedly amount to 0.5%.

- I would believe it is possible, but 0.5% is not growth. Even if the inflation decreases by 5-6%, it is hard to believe in, such miserable growth is below the statistical discrepancy. Moreover, such increase does not guarantee the same tendency in 2019.

Many things depend on the external environment: oil and potash price increase will make our life better. We have faced an unfavorable combination of artificial and natural factors. Natural factors are prices for potash fertilizers and oil. MAZs are an artificial factor. it would be better if it was related to decline of demand in quantitative terms in Russian Federation: the crisis in Russia is a good explanation. But as soon as the crisis ends the sales increase. But a relative share of MAZs in the Russian market is getting lower. It means that Belarusian trucks are not competitive enough. It is possible that tomorrow the situation in Russia improves, but there is no guarantee that they will rush for our vehicles.

- Will further economy shrinking wait on us?

- Yes, it does not matter how slow or fast, constant or fluctuating it will be, but it is a long-term trend. Strong investments are needed to change the situation, to attract investments we need reforms. Spells, requests, entreaties do not affect the economy. No strong investments - no improvement.

The market economy is easy to foresee: when it collapses, and when the growth starts. In the context of "state capitalism" authorities have enough levers including robbery of its own people, swindling of loans, and the distribution of the burden to profitable enterprises and it can make the crisis last long enough. It's like a patient connected to a respirator and keep doctors asking: how long will the patient stay alive? As soon as you pull the plug and he dies.

- What decision will be taken by the Belarusian government: reforms or North Korea version?

- I guess such choice is possible in case of serious public unrest. If it is not then a slow decay based on the following principle is possible: we can survive for a year or two, and then either donkey dies or Sultan passes away. The regime hopes that the crisis in Russia will not last forever: it will come up with a solution and we will latch on. It looks like these are prevailing thoughts among the Belarusian leadership.

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