GDP growth in Belarus in 2023 will be 0.3%
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Eurasian Development Bank
let down the results of the development of states – the unification of participants in 2022 and forecasts of the main macroeconomic indicators of the countries of the region for 2023 and 2024 are presented.
Leaders and outsiders of the region
According to the bank’s analysts, the economic situation in the Eurasian industrial sector in 2022 is developing in different directions. The economies of the sanctioned countries – Russia and Belarus – could end the year with a healthier GDP of 3% and 4.6%, respectively. The countries of Central Asia and Armenia increased in the expected year due to the fact that the demand for exports and high prices for exported goods increased. In the base scenario of the EDB analytics, by the end of 2022, Armenia’s GDP is expected to increase by 12.5%, Kazakhstan – by 2.8%, Kyrgyzstan – by 3.1%, Tajikistan – by 7.5%.
In 2023, due to the high probability of a recession in the euro area and the United States, which in turn is associated with a decrease in consumption for exported goods. Thanks to the gradual adaptation to the sanctions, the economic decline in Russia will slow down to 2%, while in Belarus there is a slight recovery growth of 0.3%. Business activity in the Russian Federation and the Republic of Belarus in 2023 will be limited by increased uncertainty, difficulties in supplying investment and intermediate products, and closing access to advanced technologies. The Russian economy may move to growth in 2024 – by 1.5%, while Belarusian statistics show moderate GDP growth rates at the level of 0.5-1%.
The analyst looks more positively at the prospects of the Central Asian part of the region. Thus, according to the forecast, economic growth in Kazakhstan in 2023 may increase to 4.2%. High rates due to state support measures and high demand requirements in Armenia (4.2% GDP growth), Kyrgyzstan (3.5%) and Tajikistan (6.5%).
The fall of Belarus’ GDP in the election year will be 4.6%
The bank’s specialists note that in the first 9 months of 2022, the economic growth rate is 4.7% year-on-year (y/y). The key factors were the alleged sanctions pressure and the resulting breaks in the production and logistics chains.
The physical volumes of the sample of Belarusian goods go off scale by tens of percent, as well as imports into the country. As a result of the fall, industry experienced (by 6.1% y/y in January-September), freight turnover of transport (by 25.2% y/y), wholesale trade (by 16.7% y/y). In the context of high uncertainty in the outlook for the economy, amazing production and complication of the conditions of goods in the country, investment activity was observed at 18.1% y/y. Consumer goods demand spillovers: Retail sales fell 2.5% y/y in 9M.
Main macroeconomic indicators of Belarus (base case)
Supporting activity in the context of economic growth: increased economic activity in relation to the export of Belarusian goods (primarily due to the weakening of the Belarusian ruble against the Russian), increased lending to the public sector, increased budget spending. The export shock from declines and declining supply chains was offset by a larger increase in exports compared to imports. So, if due to the presence of a large amount of physical data, exports and imports can be estimated at more than 20% y/y, then the value of exports increased only by 3.3% y/y, and imports – by 10.1% y/y G. .
The limited liability company in the III quarter of 2022, the economy of the Republic of Belarus began to show adaptation to the new conditions of nature. The decline in GDP widened from 7.8% y/y in Q2 to 5.5% y/y in Q3, in line with seasonally adjusted positive quarterly growth. The physical, physical volumes of supply of goods in the markets of Russia and China began to grow, but the scale of this growth may still not fully compensate for the share of the markets of Western countries and Ukraine. In addition, economic growth in the third quarter led to an increase of almost 20% yoy in grain crops. If the emerging trend of partial reorientation of exports in Russia is declining, the negative output gap will decrease in the fourth quarter, and the value of GDP by the end of 2022 will be 4.6%.
Growth by a modest 0.3% next year
The base scenario of the EDB for 2023 is based on the fact that the circulation of Belarus will be valid for the entire forecast horizon. It is assumed that the volume of exports of export goods (potash and oil products) in 2023 will gradually recover, but due to infrastructural health constraints, below the level of 2021. Closing the preservation of public sector support. The impact from the external sector will be accompanied by fission activity due to the projected growth of Russia’s GDP and slowdown in the global economy as a whole. This scenario assumes a recovery growth of the Belarusian GDP by 0.3% in 2023. That is, EDB economists believe that the Belarusian government in 2023 will not take into account the forecast indicators of socio-economic development in terms of an increase in GDP by 3.6%.
The growth of the indicator shows a positive contribution to exports, while weak domestic demand will be its sensitivity. Adjustment to the sanctions cap will meet the standard of gradual exports, which will show growth in physical volume after declining by more than 20% in 2022. A negative contribution to the projected decline in economic activity in Russia, as well as sanctions restrictions that limit the growth frontier. In turn, domestic demand may continue to contract due to the impact of the supply of investment goods, high uncertainty, declining employment and weakening IT sector momentum. Against the backdrop of weak domestic consumption, the dynamics of the physical volume of imports in 2023 is restrained.
Inflation in 2023 may slow down to 8%. In Russia, its low demand and rising prices continue. Pro-inflationary pressures from supply disruptions may ease in 2023, but are unlikely to be completely exhausted. Maintaining price growth above the target of 6% will be high inflationary expectations. Approach of the forecast to the target forecast for 2024, according to the results of which the growth of consumer prices is approaching the value of 6.8%.
Monetary policy and the exchange rate of the Belarusian ruble
In 2023, loose monetary conditions are projected to continue. The baseline scenario assumes that monetary policy will focus on the growth of economic activity. This will be reflected in the low cost of resources in the interbank market, the choice of deposit market rates and the reduction of interest rates on loans.
It should be noted that the soft nature of monetary conditions will have little impact on credit and investment and consumer decisions due to uncertainty, high risks and a declining business climate. The average level of refinancing rates is projected to be around 11.2% in 2023, which implies a decline from the current 12% to 10-11% by the end of 2023. In 2024, the rate may drop to 9% as the situation approaches the targets.
The average annual exchange rate of the Belarusian ruble against the dollar is projected at about 2.75 in 2023. The average exchange rate against the Russian ruble is expected to be about 4 BYN per 100 RUB, as at the end of 2022. Foreign trade surplus may persist in 2023 due to weak imports, however, its size will decrease due to the weakening of support from consumption. As a result of the sharp exchange rate of the Belarusian ruble in 2023–2024. maybe to balance.
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