Minsk, May 15, 2017 – The economy started stabilizing in the first quarter of 2017 supported by exports and sectoral output growth, according to the World Bank Economic Update on Belarus, but structural bottlenecks continue to weaken competitiveness. A modest growth is expected in 2018–2019, supported by gradual improvements in external demand. Tighter fiscal and monetary policies and financing provided by the Government of Russia will temporarily help address domestic and external imbalances. However, a permanent reduction in external vulnerabilities requires further strengthening of fiscal performance. Positive steps in improving domestic business environment should be complemented by comprehensive measures to restructure the enterprise sector, to facilitate the exit of inefficient companies and create conditions for more productive firms to emerge. These measures would also help to improve the competitiveness of traditional exports sectors, which have been affected by Belarus’s heavy reliance on petro-chemical exports. “Boosting the competitiveness of Belarus’s traditional exports sectors and reorienting the economy towards stronger export diversification will help to lay down the foundations for faster income growth”, said Mr. Young Chul Kim, World Bank Country Manager for Belarus. “This would require measures aimed at increasing productivity by reducing misallocation of capital and labor resources. Belarus’s endowments – highly educated workforce and favorable geographical location at the crossroads between East and West – would help to facilitate the integration of the country into the global economy and ensure a more sustainable economic growth trajectory”. A Special Topic Note on Lower Commodity Prices highlights the risks associated with Belarus’s dependency on exports of processed oil products. “Belarus’s petro-chemical industry has contributed to economic growth and supported domestic demand, but made the economy exposed to volatilities in global oil markets and energy trading with Russia. This calls for stronger mitigation of external shocks”, noted Karlis Smits, World Bank Senior Economist. “Using oil duties towards building of fiscal buffers instead of financing additional public spending would help in offsetting the negative impact of oil product export windfalls on competitiveness of traditional exports”. Since the Republic of Belarus joined the World Bank in 1992, lending commitments to the country have totaled US$1.7 billion. In addition, grant financing totaling US$28 million has been provided to various programs, including those with civil society organizations. The active investment lending portfolio financed by the World Bank includes nine operations totaling US$973 million.
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