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Macroeconomic Situation and Prospects for Social and Economic Development of the Republic of Belarus

Economic Review

The current economic situation in Belarus is characterised by a dynamic economic growth. Increase of the gross domestic product has been accompanied by advanced growth rates of industrial production, construction and installation work and paid services provided to population.

The population demand for non-food products and consumer services expands at accelerated rates. Population shows an increased interest in housing construction using their own funds and credits provided by commercial banks.

Gross domestic product. In 2004, gross domestic product (GDP) increased by 11 percent as compared to 2003. This is one of highest indicators among Commonwealth of Independent States (CIS). There is an increasing dynamics of GDP: 4.7 percent increase in 2001, 5.0 percent in 2002, 7.0 percent in 2003, and 11.0 percent in 2004. The policy of the Government of the Republic of Belarus is to increase competitiveness of the national economy through its technological update, use of environmentally-clean resource- and energy-saving technologies, and transfer of foreign technologies by boosting investments.

Industry of the Republic of Belarus provides over half of the GDP growth. In 2004, the industrial output went up by 15.6 percent against 2003. High growth rates of industrial output have resulted from further increase of export and an advantageous conjuncture in the Russian market, which is the main external market of products, not related to raw materials, for Belarus. In parallel, the work is done to increase product competitiveness through non-price factors, which facilitates promotion of goods to markets other than CIS countries; therefore, export to countries other than CIS increases by more dynamic indicators as regards different export items.

Investments in the Republic of Belarus represent a priority line of use of the increased GDP. In 2004, the growth rate of investment into fixed capital was 120.2 percent against 2003. Enterprises become more involved into the investment process. Over 57 percent of investments have been secured by funds owned by enterprises, including bank credits. The share of foreign investments still remains at a low level; however, it is considered an essential element for the transfer of knowledge and technologies from other countries, and for accelerated technological update and modernisation of the national production potential.

Inflation in the Republic of Belarus has overcome the crisis character which was in place in the second half of 1990’s. Consistent implementation of measures related to a strict monetary and credit policy helps reduce the rate of inflation.

The low devaluation of the Belarusian rouble alongside other economic and monetary factors have facilitated further reduction of inflation to the level which is within the predicted socio-economic development of the country in 2004: 14-18 percent a year. This figure, 14.4 percent, has been the lowest indicator over the entire history of the Belarusian state and has become one of the essential prerequisites for the economic growth in the country. In 2004, the average monthly growth of consumer prices made 1.1 percent against 1.9 percent in 2003.

The current transactions account of the balance of payment. Belarus traditionally has a negative balance of current transactions: in 2004, it made (-1043) million US dollars. However, the economic performance over the last four years has shown that this does not prevent Belarus from implementing a policy of stable dynamics of the Belarusian rouble exchange rate, without spending official currency reserves to this end.

The main factor influencing the current transactions account in 2004 as well as the balance of payment was, as before, an active development of foreign trade, which in turn depended on a range of factors. Among them are: a significant growth of export to states other than CIS countries; increased demand for Belarusian products from Russia due to the economic growth of the main trade partner of Belarus. In 2004, the growth of physical volumes of commodity export was 15.0 percent compared to 2003, with the increased level of export prices in the dollar equivalent by 20.2 percent.

Exchange rate. The priority line in the monetary and credit policy in 2004 was the protection and ensuring of stability of the Belarusian rouble, its purchasing power and exchange rate. In 2004, the nominal exchange rate of the Belarusian rouble against the US dollar went down by only 0.6 percent, whereas in 2003 this decrease was 12.3 percent. This result has been achieved basically by maintaining gradual and predictable dynamics of the official Belarusian rouble exchange rate.

Basic Socio-economic Indicators