On The Verge Of Another Crisis
BMI View: The Belarusian economy is set to suffer a prolonged period of economic instability and decline as a result of a decline in global potash prices and an escalating trade war with Russia. If Russo-Belarusian relations cannot be patched up, state revenues are set to decline considerably, the net exports deficit will widen significantly and real GDP growth will decline significantly.
The Belarusian economy has stood on the edge of a precipice ever since the inflation crisis of 2011, with low productivity, a lack of infrastructure and an oppressive state bureaucracy impeding investment and real GDP growth. The recent actions of the government with regard to the break-up of the Belarusian Potash Corporation (BPC) joint-venture between Russian producer Uralkali and Belarusian state-owned firm Belaruskali, and the subsequent diplomatic spat between the two states, may well tip the economy into the chasm.
While in the first quarter of 2013 much of Belarus's economic data was positive, with real GDP growth recorded at 4.0% year-on-year (y-o-y), the substantial decline in potash prices and production volumes that our Agribusiness team forecasts ( see 'More Troubles For Potash Producers', July 31) is set to weigh heavily on net exports in Q413 and going into 2014. The decline in potash prices and production will also weigh on government expenditure, with around 12% of state revenues coming from the production and export of potash in 2012. We have therefore revised down our real GDP forecasts for Belarus in 2013 and 2014 from 1.3% and -1.1% to -0.4% and -2.2% respectively.
|Net Exports Set To Decline Sharply|
|Belarus - Components of Real GDP By Expenditure, BYRbn and Real GDP, % chg y-o-y|