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  5. > Belarus Country Risk Report Q4 2015

Belarus Country Risk Report Q4 2015

  • August 2015
  • -
  • Business Monitor International
  • -
  • 37 pages

Core Views

The ongoing crisis in Ukraine will ensure support for PresidentAlexander Lukashenko remains robust in the run up to the 2015presidential election. Opinion polls indicate voters prefer the stabilityengendered by the regime to the uncertainty following the ousting ofthe president, and we believe the government will continue to divideits focus between closer Russian and EU relations.

The Belarusian economy will remain in recession until 2016 as thefallout from Russia’s economic crisis spreads. Stagnant real wagegrowth driven by high inflation will cap consumer spending, whilecollapsing demand from Russia and Ukraine will exacerbate Belarus’external imbalances and ensure that net exports remain a drag ongrowth.Consumer price inflation to remain high in Belarus over the nexttwo years as the rouble’s continued depreciation stokes importedinflationary pressures, though tight monetary policy and slow realwage growth will prevent a return to the hyperinflation witnessed in2012.

Major Forecast ChangesW e have revised up our current account deficit forecast for 2015from 8.1% of GDP to 7.4% of GDP to reflect the continued fall inimports as a result of weakened household purchasing power.Consumer price inflation has been slow to build over the courseof 2015, though as the BYR has hit new lows against the USD weexpect this will begin to rise in Q415. We have revised down ouraverage inflation forecast for 2015 from 18% to 16%.W e expect some strength in BYR against USD over the remainderof 2015 as oil prices stabilise, but forecast steady depreciation overa longer term time horizon. We have revised our average BYR /USDforecast for 2015 and 2016 to BYR 15,300/USD and BYR 16,625/USD.

Table Of Contents

Belarus Country Risk Report Q4 2015
Executive Summary 5
Core Views5
Major Forecast Changes5
Key Risks To Outlook5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Index 7
Domestic Politics 8
Lukashenko Re-Election Assured, But Recession To Boost Opposition8
Belarusian President Alexander Lukashenko is assured of re-election to a fifth term on October 11, as the opposition is too weak to
mount a credible challenge Beyond the election, Belarus' deteriorating economic conditions will gradually boost the opposition, which
will seek to build long-term momentum ahead of future elections
Tabl e: Political Overview8
Long-Term Political Outlook 10
Lukashenko And Russia To Determine State Evolution10
Belarus' long-term future depends almost entirely on two factors: the longevity of President Alexander Lukashenko, and the country's
relationship with Russia Lukashenko is likely to remain in power for at least the next few years, due to opposition weakness, but he will
eventually prove vulnerable to removal
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Index 13
Economic Activity 14
Regional Downturn Weighing On Domestic Growth14
Belarusian economic growth momentum will be slow in 2016 following a contraction in 2015 Improving external conditions will alleviate
pressure on the economy and allow for real GDP growth of 07% in 2016
tabl e: Eco nomic Acti vit y14
Balance Of Payments 15
Deficit Financing: An Ever Prominent Risk15
A contraction in both imports and exports will prevent a drastic deterioration in Belarus' current account position Nevertheless, a wide
current account deficit, an inability to garner FDI, and a depleted reserve arsenal make current account financing a prominent risk over
the next five years
tabl e: Bala nce Of Payments 16
Monetary Policy 18
Exchange Rate Pass-Through Slow To Materialise18
Belarusian inflation will increase from currently low levels, driven by currency depreciation Though we expect inflation to rise, the
exchange rate pass-through effect will be partially mitigated by severely weakened domestic demand
tabl e: Mo neta ry Polic y18
Fiscal Policy 19
Fiscal Position Worse Than Figures Suggest19
Belarus' recessionary economy will contribute to the budget moving into deficit in 2015, before improving economic conditions push the
fiscal balance into surplus the following year Strong fiscal readings partially mask weaknesses in the country's finances
tabl e: Fiscal Polic y20
FX Forecast 20
BYR: Weakness Ahead In 201620
We expect some strength in BYR against USD over the remainder of 2015 as oil prices stabilise, but forecast steady depreciation over a
longer term horizon
Chapter 3: 10-Year Forecast 23
The Belarusian Economy To 2024 23
Economy Faces Tough Years Ahead23
We remain downbeat on 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
tabl e: Long-Term Mac roeco nomic Forecasts 23
Chapter 4: Operational Risk 25
SWOT Analysis 25
Operational Risk Index 25
Operational Risk 26
tabl e: Operatio nal Ris k26
Market Size And Utilities 27
Tabl e: Emergi ng Eu rop e - Ma rket Size And Utiliti es Ris k 28
International Security Risk 31
tabl e: Emergi ng Eu rop e - Interstat e Secu rit y Ris ks31
Chapter 5: BMI Global Macro Outlook 35
Global Macro Outlook 35
China Crisis To Have Far-Reaching Impact35
Tabl e: Global Assu mptio ns35
Tabl e: Develop ed Stat es, Real GDP GrowtH, %36
Tabl e: Emergi ng Ma rkets , Real GDP Growth , %37

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