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Belarus Business Forecast Report Q4 2014

  • September 2014
  • -
  • Business Monitor International
  • -
  • 29 pages

Core Views
The ongoing crisis in Ukraine will ensure support for President
Alexander Lukashenko remains robust in the run-up to the 2015
presidential election. Opinion polls indicate voters prefer the stability
engendered by the regime to the uncertainty following the ousting of
the president, and we believe the government will continue to divide
its focus between closer Russian and EU relations.
The Belarusian economy will receive a boost over the remainder of
2014 and into 2015 as agricultural exports to Russia increase in the
wake of the Kremlin’s ban on Western food imports. Nevertheless,
the damage done to the Russian economy by the tit-for-tat sanctions
will feed through into declining investment in Belarus and a fall in
export demand beyond the initial one-year timeframe for the import
ban.
Consumer price inflation in Belarus will remain elevated in the quarters
ahead as Russia’s ban on the import of foodstuffs from the EU and
other Western states results in higher export volumes to Russia, but
a constriction in domestic supply.

Major Forecast Changes
In light of the close economic and political relationship between
Belarus and Russia, geographic proximity and already entrenched
agricultural bilateral trade links, we believe exports to Russia (Belarus’
largest export market) will increase over the remainder of 2014
and into 2015. As a result we have revised up our real GDP growth
forecast for 2014 from 0.1% to 0.8% (still well below the optimistic
3.3% target set by President Alexander Lukashenko), but we hold
to our forecast of 0.9% in 2015.

Table Of Contents

Belarus Business Forecast Report Q4 2014
Executive Summary. 5
Core Views..5
Major Forecast Changes5
Key Risks To Outlook5
Chapter 1: Political Outlook. 7
SWOT Analysis.. 7
BMI Political Risk Ratings 7
Domestic Politics.. 8
Geopolitical Uncertainty To Boost Lukashenko Regime.8
The ongoing Ukraine crisis will ensure support for Belarusian President Alexander Lukashenko remains robust in the run-up to the 2015
presidential election. Opinion polls indicate voters prefer the stability engendered by the regime to the uncertainty following the ousting
of the president, and we believe the government will continue to divide its focus between closer Russian and EU relations.
Table: Political Overview..8
Long-Term Political Outlook 9
Focus Remains On Russia9
Belarus's long-term political stability is jeopardised as a result of the country's lack of institutional development beyond the executive
branch. Consequently, while our core scenario is for President Alexander Lukashenko's regime to maintain its grip on power over the
long term, we do not rule out the possibility of growing public dissatisfaction resulting in a sudden change of leadership or direction. The
most likely spark for any public unrest is the November 2015 presidential election, with large protests erupting following the 2010 poll.
We believe the country's greatest challenge over the coming decade will stem from the regime's efforts to diversify its foreign policy
agenda while maintaining strong links with Russia.
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Ratings... 13
Economic Activity... 14
Export Boost Not Enough To Meet Growth Target14
The Belarusian economy will receive a boost over the remainder of 2014 and into 2015 as agricultural exports to Russia increase in the
wake of the Kremlin's ban on Western food imports. Nevertheless, the damage done to the Russian economy by the tit-for-tat sanctions
will feed through into declining investment into Belarus and a fall in export demand beyond the initial one-year timeframe for the import
ban.
Table: Economic Activity..14
Fiscal Policy. 15
Budget Deficit On The Way.15
Belarus' budget balance will flip from a surplus to deficit in 2014, before widening further in 2015 as government expenditure rises
ahead of the November presidential election. Eurasian Economic Union membership in 2015 will see a decline in revenue as the few
remaining import tariffs on Russian and Kazakh goods are removed.
Table: Fiscal Policy16
Monetary Policy... 17
Prices To Rise As Exports To Russia Constrain Domestic Supply.17
Consumer price inflation in Belarus will remain elevated in the quarters ahead as Russia's ban on the import of foodstuffs from the EU
and other Western states results in higher export volumes to Russia, but a constriction in domestic supply.
Table: Monetary Policy17
Chapter 3: 10-Year Forecast... 19
The Belarus Economy To 2023.. 19
Economy Faces Tough Years Ahead.19
We remain cautious towards Belarus' long-term growth potential on the back of the large footprint of the state on the economy, which
will stifle productivity and deter private fixed investment. We do, however, expect the country to pursue a modest degree of political
liberalisation, although we caution that meaningful democratisation is unlikely and that Moscow will remain Minsk's principal benefactor.
Table: Long-Term Macroeconomic Forecasts19
Chapter 4: Business Environment. 21
SWOT Analysis 21
BMI Business Environment Risk Ratings.. 21
Business Environment Outlook. 22
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS22
TABLE: BMI LEGAL FRAMEWORK RATING.23
Infrastructure... 24
TABLE: LABOUR FORCE QUALITY..24
TABLE: EMERGING EUROPE - ANUAL FDI INFLOWS...25
Market Orientation... 26
TABLE: TRADE AND INVESTMENT RATINGS.26
Operational Risk.. 28
TABLE: TOP EXPORT DESTINATIONS, USDmn.28
Chapter 5: BMI Global Assumptions. 29
Global Outlook. 29
Eurozone Downgrade On Poor Q214..29
Table: Global Assumptions.29
Table: Developed States, Real GDP GrowtH, %...30
Table: BMI VERSUS BLOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %. 30
Table : Emerging Markets , Real GDP Growt h, %..31

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