Country Report Belarus December 1998 Main report

Economy: High GDP growth figures have now begun to fall --

Belarus's recent impressive real GDP growth figures, including the 10% increase registered last year, relied overwhelmingly on a mixture of concessionary trade with Russia, centrally allocated resources and generous directed credits. Rather than restructure existing production facilities, Belarus has chosen to use this easy credit to expand existing facilities to the limit in order to capitalise on the underutilised capacity in the economy caused by its considerable post-Soviet decline. In the first nine months of 1998 Belarusian output continued to post impressive growth rates, increasing by 10% over the corresponding period in 1997. These figures, however, belie the limits of Belarus's policies and the decline of the economy in the wake of Russia's crisis. This decline becomes more apparent through monthly growth figures, which reveal a slowdown that began even before the crisis in Russia. Cumulative growth since the start of the year, compared with similar periods in 1997, fell from over 12% at the mid-year mark to 11% at the end of August, 10% at the end of September and 9% by the end of October.

Gross domestic product 1997 1998 Jan-Sep Jan-Jun Jan-Aug Jan-Sep Jan-Oct % change year on year 11.0 12.0 11.0 10.0 9.0 Source: official statements.

-- as growth in industrial production falters --

Although industrial production in the first nine months of 1998 registered robust 10.8% growth compared with the same period last year, figures for September showed a 4.5% drop over the preceding month, following a 3.3% month-on-month increase in August. These September figures present the first significant month-on-month decline in a year. Regional variations were large, from a 2.5% fall in the Gomel region to 8.8% in the Minsk region (the city of Minsk actually registered 2.5% growth) and 9.4% in the Grodno region. Among industries, oil processing fared the worst with a drop of more than 20% month on month in September, followed closely by the fuel industry with a decline of more than 19%. In all other industries, with the exception of energy, textiles, and garment and leather goods production, the decline in output varied from 0.1% to 9.6%.

-- and agricultural output declines

The government has maintained considerable control over the agricultural sector in its attempts to boost output. Nonetheless, agricultural production in the first ten months of 1998 fell by 0.6% according to preliminary data. Grain output proved particularly poor, falling by 21% in 1998 compared with the preceding year, with the result that Belarus will probably need to increase its grain imports from hard-currency suppliers. While adverse weather conditions played a role, the agricultural sector's poor performance suggests the limits of government policies that have effectively forestalled significant restructuring by channelling credits to crop areas in which inefficient production methods still predominate.

© 1998 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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