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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007
BELARUSIAN CURRENCY AND STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Economic and Political Environment
Having won a third consecutive term in office
in the March 19th presidential election,
Alyaksandar Lukashenka will continue to
dominate the political scene beyond
2006-07. Although the opposition gathered
more momentum during the election
campaign than was expected, the authorities'
tough measures will ensure that it remains at
the margins of political life, particularly as the
Lukashenka administration will take further
steps to stifle independent political opinion.
It has already equipped itself with a
legislation and judicial system that allows it
to do so in a seemingly legal way.
The EU and, in particular, the US will
continue to criticize the Lukashenka
administration's poor human rights record
and to call for political reforms. However, as
democratic reforms are incompatible with
Mr. Lukashenka's goal of staying in power for
the foreseeable future, calls for political
liberalization will go unheeded. It is therefore
likely that the EU's position will become
progressively harder and eventually
converge with that of the US. Relations with
the US have deteriorated further in recent
months and are unlikely to recover without a
change in leadership in Belarus.
World GDP growth is expected to average an
extremely robust 5.3% in 2006, measured
using purchasing power parity weights.
Weighted import demand growth in Belarus's
20 largest markets is forecast to average
12.5% annually in 2006-07. Real GDP growth
in Russia, which is still by far the single most
important export destination for Belarus, will
remain well above 5% annually. The EU is
growing at a much more moderate pace,
although it is still accelerating. More
important, with respect to exports to the EU,
is that world oil prices will remain high by
historical standards, reflecting supply
problems and geopolitical concerns about
Iran's nuclear program.
Economic Performance
Economic growth is expected to moderate,
as most of the factors underpinning
economic expansion in recent years are
unlikely to persist. Oil prices, which have
provided windfall export earnings to Belarus,
are expected to remain high but are not likely
to continue to rise as they have in recent
years. Real currency appreciation and rising
gas input prices will reduce external
competitiveness. Import demand for
Belarusian goods in Russia is unlikely to
increase, and Russian firms will put pressure
on Belarusian suppliers in the Russian
market. GDP growth of 8.8% is expected this
year, a rate that will fall to 6% in 2007.
The Belarusian rubel has strengthened
slightly against the US dollar so far in 2006,
and the National Bank of Belarus (NBB, the
central bank) is planning to keep the rate
roughly stable against the US currency in
nominal terms throughout 2007. In line
with gradually widening trade imbalances
and growing concerns over external
competitiveness. Although the currency
union with Russia planned for 2006 has been
postponed, the idea will not be abandoned
altogether. With negotiations over currency
union ongoing, the NBB will allow only
gradual nominal depreciation against the
Russian ruble.
Imports will continue to grow strongly, with
domestic demand for consumer and
investment goods remaining strong, and the
government's import suppression measures
remaining only partly effective. Moreover, the
price paid for Russian gas will push up
import costs further. On the export side,
Belarus will still benefit from high world oil
prices, but is unlikely to see any more sharp
increases in these prices (which have helped
to push up sales to western Europe in recent
years). An additional concern for Belarus
comes from signs of slowing growth in
Russian demand for Belarusian exports.
In 2006 the current-account is expected to
return to deficit, which is forecast to expand
to more than 5% of GDP in 2007.*
* The Economic Intelligence Unit Ltd., September 2006
Key Information Contacts
President of Belarus www.president.gov.by/en/
Council of Ministers www.government.by/en/eng_news.html
Ministry of Foreign Affairs www.mfa.gov.by/eng/index.php?id=2&d=contacts/links
Belarusian Telegraph Agency (National Source of Information) www.belta.by/en/
2005-MAIN ORIGINS OF GROSS DOMESTIC PRODUCT (%)
Transport & communications Trade & catering
Industry Agriculture Construction Other
2005-MAIN COMPONENTS OF GROSS DOMESTIC PRODUCT (%)
Private consumption Public consumption Gross fixed investment
Increase in stocks Net exports of goods & services
27.4
9.7
9.0
7.5
7.0
60
50
40
30
53.2
27.9
20
19.6
39.4
10
0
1.7 1.0
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