2013-01-15 13:17:18 - Belarus Business Forecast Report Q1 2013 - a new country guide report on companiesandmarkets.com
Exports are set to remain the major driver of growth in light of the severely weakened Belarusian ruble (BYR), while corporate investment is likely to struggle over the next few quarters. As it stands, we believe the government´s growth forecasts of 8.5% this year are overly ambitious and will not be met. This is not only a result of the knock-on effects from the 2011 economic crisis, but also due to the relatively fragile picture for global growth. We believe that economic growth will remain positive at 5.8% in 2013, but will nonetheless represent a major slowdown on pre-hyperinflation growth.
We anticipate consumer price inflation to continue falling over the next few months, hitting 25% by the end of 2012, and
15% by end-2013.
While the central bank has been lowering the refinancing rate, the recent decision to raise reserve requirements on foreign currency borrowing signals monetary authorities´ continued intent to rein in inflationary pressures. On the external front, the current account has flipped back into surplus territory over the past three quarters. We expect a continued widening of the surplus owing to weak domestic demand, robust export growth and lower energy prices.
The recent parliamentary elections seem to have yielded no change to the political status quo. There has been a lack of domestic protests, unlike those witnessed in the aftermath of presidential elections in December 2010, implying an effective crackdown by state authorities on opposition activities. On the foreign policy front, the recent diplomatic spat with Sweden has only further cemented Belarus´s political isolation from the EU. This is likely to result in a continued shift towards Russia, both economically and politically, which presents huge risks to Belarus´s long-term economic potential.
Major Forecast Changes
On the back of a greater-than-anticipated adjustment in Belarus´s external accounts, we have revised our current account forecasts for the next couple of years. We now forecast a full-year surplus equivalent to 2.5% of GDP in 2013 and 2.8% in 2014, having previously envisaged surpluses of 1.5% and 1.8% respectively.
Key Risks To Outlook
Economic Risk: The biggest risk to Belarus´s medium-term growth trajectory still stems from government and central bank policy.
While our core view is for policy to remain broadly tight, in order to help combat inflationary pressures, we cannot rule out authorities pursuing a more expansionary policy in order to boost economic growth this year and mitigate any domestic political risks stemming from lacklustre economic activity. This policy course could end up reigniting inflationary concerns and currency instability further down the line, thereby sacrificing future growth for near-term gains.
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