Abstract
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In 2004, Belarus experienced strong economic growth, supported by a favorable external environment and policies aimed at raising incomes and credit, the IMF said in its annual economic review. Inflation was halved during 2004 and slowed further to 11 percent in April 2005, aided by a balanced budget, exchange rate stability, and continued remonetization on the back of rising trust in banks and the national currency. Inflationary financing of the budget from the central bank was discontinued, and budgetary consolidation progressed further. International reserves rose, government debt is low, and the end-2004 surge in the current account deficit was largely reversed in early 2005.
On the downside, market-oriented structural reforms have stalled, and the business environment is not conducive to private—including foreign—investment. Privatization has largely ground to a halt, and the private sector’s share of GDP remains low at around 25 percent. Given the economy’s current momentum, significant growth is likely in 2005, but its long-term prospects are uncertain in the absence of wide-ranging structural reforms and a phase-out of pervasive quasi-fiscal activities, notably rapid centrally mandated wage increases and directed lending (which has contributed to escalating liquidity problems in key banks and necessitated further government recapitalizations).
The IMF’s Executive Board welcomed the country’s strong growth, reduced inflation, and markedly improved poverty indicators. It cautioned, however, that the massive benefits reaped from Russian energy import pricing are likely to fade. It therefore urged the authorities to take advantage of the current favorable external environment and the economy’s momentum to tighten macroeconomic policies and launch wide-ranging reforms to facilitate sustained private-sector-led growth. It underscored the need to accelerate the consolidation of quasi-fiscal activities into the budget and reduce their magnitude to safeguard the budget balance. While the nominal exchange rate has played a useful anchoring role from early 2004, the Board saw a need to retain a measure of exchange rate flexibility to safeguard against excessive real appreciation and help deal with exogenous shocks. In addition, the central bank will need to make low inflation its primary objective—a step that would entail granting the central bank full operational autonomy—and to continue raising the level of foreign reserves.
Unless otherwise indicated.
Period average.
| Republic of Belarus | 2001 | 2002 | 2003 | 2004 | |
|---|---|---|---|---|---|
| (annual percent change 1) | |||||
| Real GDP | 4.7 | 5.0 | 7.0 | 11.0 | |
| CPI (end-of-period) | 46.1 | 34.8 | 25.4 | 14.4 | |
| Real average monthly wage (1996=100) | 213.9 | 231.9 | 238.7 | 279.0 | |
| Gross international reserves | |||||
| (months of imports of goods and services) | 0.5 | 0.6 | 0.5 | 0.6 | |
| Medium- and long-term debt (percent of GDP) | 9.2 | 9.8 | 8.1 | 5.9 | |
| Short-term debt (percent of GDP) | 10.4 | 11.0 | 10.8 | 12.8 | |
| Exchange rate (rubles per U.S. dollar2) | 1,383.0 | 1,784.0 | 2,052.0 | 2,160.0 | |
Unless otherwise indicated.
Period average.
| Republic of Belarus | 2001 | 2002 | 2003 | 2004 | |
|---|---|---|---|---|---|
| (annual percent change 1) | |||||
| Real GDP | 4.7 | 5.0 | 7.0 | 11.0 | |
| CPI (end-of-period) | 46.1 | 34.8 | 25.4 | 14.4 | |
| Real average monthly wage (1996=100) | 213.9 | 231.9 | 238.7 | 279.0 | |
| Gross international reserves | |||||
| (months of imports of goods and services) | 0.5 | 0.6 | 0.5 | 0.6 | |
| Medium- and long-term debt (percent of GDP) | 9.2 | 9.8 | 8.1 | 5.9 | |
| Short-term debt (percent of GDP) | 10.4 | 11.0 | 10.8 | 12.8 | |
| Exchange rate (rubles per U.S. dollar2) | 1,383.0 | 1,784.0 | 2,052.0 | 2,160.0 | |
Unless otherwise indicated.
Period average.