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Lukashenka's Economy Stuck

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Lukashenka's Economy Stuck

There can't be any reference to return to the economy of 2014.

Experts say there can't be any improvement in the economy of Belarus in the near future.

The best scenario for 2016-2017 is an extremely slow way to the economy recovery.

"Recession will continue in the near future, the economy is still up in the air. In better case a slow way to the economy recovery may start and in next six months. It much depends on the situation with debts," Dzmitry Kruk, expert of BEROC, told Thinktanks.by.

Earlier the expert said that a high domestic and external debt jeopardised the economy of the country. The external debt should be paid in foreign currency, while the GDP of Belarus in dollar terms has considerably decreased recently. As regards the domestic debt, one of the most serious problems is the growth of bad debts, which may be higher than official statistics show.

According to Dzmitry Kruk, the economic recovery is possible not because there are new drivers of growth, but due to the low base effect: "It is easier to start recovering, when you have a bad fall. Now our economy is at the level that was reached in 2014, such level remains out of the question. Some stabilization is likely to happen."

The expert suggests that the National Bank and the government will be able to achieve the planned target for inflation at the rate of 12% this year. "But this is not the figure one can boast of. Yes, there is a slowdown in inflation compared to 2011. However, the figure of 12% is high, according to international standards. And the main thing is that such inflation takes place against the backdrop of the economic downturn. The demand drops and prices continue to rise in the country," Dzmitry Kruk noted.

In the future, the situation with the inflation will depend on whether the National Bank continues to conduct a tight monetary policy. "It is possible that under the pressure of the real sector everything can resume its natural course, and the National Bank will be forced to take softer policy to stimulate growth indicators. And it could lead to a new inflation," the expert suggested.

Agreements between Russia and Belarus on gas price reduction achieved recently will not result into significant improvements in our economy. "The new gas price will help a little to correct the balance of trades, to support the volume of foreign exchange revenue. But it is not a long-term sustainable and competitive advantage. It can be a driver not more than for six months," Dzmitry Kruk believes.

According to the expert, against this background, the financial situation of the population is unlikely to improve, because "real wages will be frozen, even if some adjustments are made in nominal terms."

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