Country Report Belarus December 1998 Main report

Summary--Belarus 4th quarter 1998.

Outlook for 1999-2000: President Alyaksandar Lukashenka and his close entourage will remain the predominant force in Belarusian politics despite an increasingly tarnished economic record of spiralling inflation, widespread shortages and greatly reduced growth. The government will maintain its interventionist economic policy, although shocks from the crisis in Russia and the danger of hyperinflation will force Belarus's easy credit policy to tighten, leading to economic stagnation in 1999. The EIU expects only a slight increase in growth in 2000, owing to stabilisation in Russia and loosened monetary policy at home -- which will also lead to an acceleration of inflation towards the end of the forecast period. The country's financing difficulties, as a result of a significant current-account deficit, will continue during 2000.

Political scene: Recent opinion polls indicate the continued popularity of Mr Lukashenka, as well as the weakness of the opposition caused by its inability to mobilise important constituencies. As another step towards closer union with Russia, Belarusian and Russian legislators have approved a draft law on joint Belarusian-Russian citizenship.

Economic policy: Mr Lukashenka interprets Russia's crisis as a vindication of his own anti-market economic policies. Monetary and credit expansion have continued to accelerate, in conjunction with foreign-exchange restrictions, price controls and consumer goods rationing. The government has tightened restrictions on private trade with Russia.

Economy: Inflation has soared since August, while shortages of consumer staples have proliferated. Although growth rates for the year remain high, both industrial and agricultural output have faltered. Stocks of unsold goods are increasing.

Foreign trade & payments: Although Russia remains Belarus's main trade partner, exports to Russia have declined dramatically. Exports to non-CIS markets have also fallen steeply, reinforcing a dangerous trend towards higher trade deficits with non-CIS countries.

Business news: The Danish container carrier, Maersk Line, has opened an office in Minsk despite the worsening economic situation.

© 1998 The Economist lntelligence Unit Ltd. All rights reserved
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