Economic Analysis - No End In Sight To GDP Contraction - MAY 2017


BMI View: We are revising our 2017 real GDP growth forecast for Belarus to -1.0%% from +1.8% previously, marking the third consecutive annual contraction. The economy is coming under significant strain as a result of the deteriorating political relationship with Russia and the resultant reduction in oil shipments to the country, while an IMF deal remains far from assured.

The Belarusian economy is coming under significant strain as a result of the deteriorating political relationship with Russia and the resultant reduction in oil shipments to the country. The Belarusian economy has traditionally benefitted immensely from its ability to import heavily subsidised crude oil from neighbouring Russia, re-exporting refined products to the EU and CIS countries at market prices, including to Russia itself. However, over the past six months Russian oil shipments to Belarus have taken a tumble due to the deteriorating political relationship. As a result, we are revising down our 2017 real GDP growth forecast for Belarus to -1.0%% from +1.8% previously. This would mark the third consecutive annual contraction in economic activity.

Given the inefficiency of Belarus's state-dominated economy and the country's large external debt position, Russian assistance is crucial to allowing the Belarusian economy to grow and stave off default. With no improvement in relations between the two countries, default and devaluation would become increasingly likely.

Depreciatory Pressures Continue To Mount
BYN Versus RUB, Rebased
Source: Bloomberg, BMI Research

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