IMF Executive Board Concludes 2018 Article IV Consultation with the Republic of Belarus

IMF News, January 18, 2019

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IMF Executive Board Concludes 2018 Article IV Consultation with the Republic of Belarus

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• Published: January 18, 2019

Growth, external accounts, and inflation — Findings

• Real GDP growth in the first three quarters of 2018 reached 3.7 percent.
• The current account deficit could reach 2½ percent of GDP in 2018, versus 1.6 percent in 2017.
• Inflation was 5 percent y/y in November 2018.
• The exchange rate has remained relatively stable on a nominal effective basis, as have international reserves.
• Higher oil prices and robust external demand supported exports; domestic demand was boosted by double-digit wage growth tied to ambitious wage targets.
• Stronger imports, including related to the nuclear power plant construction, contributed to some deterioration in the external accounts despite positive terms of trade.
• Budget revenues could increase by some ¾ percentage points of GDP in 2018 relative to 2017, but expenditures—particularly capital spending, wages and salaries—have been rising faster.
• The overall budget deficit including quasi-fiscal spending on state-owned enterprises could reach 1.3 percent of GDP in 2018, from 0.3 percent in 2017.
• The deficit is projected to fall modestly over the medium-term to about ½ percent of GDP, notably thanks to the planned completion of the nuclear power plant.
• Medium-term growth is projected at 2 percent absent vigorous structural reforms; this projection is conditional on full compensation from Russia for losses triggered by Russia’s new energy taxation system (the so-called tax maneuver).
• Key risk: if compensation from Russia is significantly less than full, medium-term growth could be materially lower than 2 percent, and the budget and current account deficits higher than projected.

Executive Board assessment and policy recommendations

• Main risks highlighted:
  • Rapidly rising public debt.
  • High dollarization.
  • Uncertainty about negative spillovers from Russia’s new energy taxation system.
• Fiscal policy:
  • Directors encouraged authorities to undertake additional consolidation, spread over the next three years, to achieve a credible medium-term debt target balancing development needs and fiscal sustainability.
  • Directors encouraged monitoring fiscal risks from state-owned enterprises (SOEs) and gradually switching funding toward rubel-denominated debt to reduce exchange rate susceptibility.
• Monetary and financial policy:
  • Directors agreed on the importance of continued central bank independence and supported the current monetary policy stance, which is consistent with the inflation target goal.
  • Directors welcomed continued progress towards inflation targeting and commended liberalization of the FX market and reductions in directed lending.
  • It will be important to eliminate interest rate caps.
  • Directors encouraged continued efforts to strengthen financial sector stability and welcomed progress on implementing FSAP recommendations; they urged implementation of remaining recommendations.
  • Directors emphasized the need to further reduce high dollarization and to develop local capital markets as a key component of successful de-dollarization.
• Structural reforms and social policy:
  • Directors called for a comprehensive reform of state-owned enterprises via a systematic, risk-based assessment of SOEs’ viability followed by an actionable restructuring plan.
  • Directors underscored the need for enhanced social safety nets to cushion the impact of restructuring on vulnerable groups.
  • Facilitating private sector activity by improving the business climate and leveling the playing field was highlighted as important.

Selected economic indicators (baseline) — Key statistics (2016–2023)

• Real GDP (percentage change):
  • 2016: -2.5
  • 2017: 2.4
  • 2018: 3.7
  • 2019: 2.4
  • 2020: 2.8
  • 2021: 2.3
  • 2022: 2.0
  • 2023: (table lists values under projections)
• Total domestic demand (percentage change):
  • 2016: -5.4
  • 2017: 4.0
  • 2018: 4.8
  • 2019: 3.1
  • 2020: 2.0
  • 2021: 1.5
  • 2022: 1.8
  • 2023: 2.1
• Consumer prices:
  • End of period 2016: 10.6
  • End of period 2017: 4.6
  • End of period 2018: 5.5
  • Average 2016: 11.8
  • Average 2017: 6.0
• Net credit to the economy (percent of GDP):
  • 2016: 41.5
  • 2017: 40.2
  • 2018: 40.1
  • 2019: 41.0
  • 2020: 41.4
  • 2021: 42.6
  • 2022: 43.1
  • 2023: 44.7
• Net credit to private sector (percent of GDP):
  • 2016: 21.7
  • 2017: 22.4
  • 2018: 22.9
  • 2019: 23.5
  • 2020: 24.3
  • 2021: 25.7
  • 2022: 26.6
  • 2023: 27.9
• Current account balance (percent of GDP):
  • 2016: -3.4
  • 2017: -1.6
  • 2018: -2.6
  • 2019: -4.0
  • 2020: -2.3
  • 2021: -2.4
  • 2022: -2.2
• Trade balance, goods (percent of GDP):
  • 2016: -5.3
  • 2017: -5.9
  • 2018: -5.6
  • 2019: -4.3
  • 2020: -4.1
  • 2021: -4.1
• Exports of goods (percent of GDP):
  • 2016: 48.4
  • 2017: 52.7
  • 2018: 53.3
  • 2019: 52.5
  • 2020: 53.8
  • 2021: 54.3
  • 2022: 53.7
• Imports of goods (percent of GDP):
  • 2016: 58.0
  • 2017: 59.2
  • 2018: 58.1
  • 2019: 58.3
  • 2020: 57.7
  • 2021: 56.8
• Gross external debt (percent of GDP):
  • 2016: 78.6
  • 2017: 73.3
  • 2018: 68.3
  • 2019: 69.0
  • 2020: 67.5
  • 2021: 66.8
  • 2022: 66.1
  • 2023: 64.3
• Public gross external debt (percent of GDP):
  • 2016: 36.9
  • 2017: 37.7
  • 2018: 36.2
  • 2019: 38.9
  • 2020: 37.5
  • 2021: 36.7
  • 2022: 36.1
  • 2023: 34.9
• Private gross external debt (including SOEs) (percent of GDP):
  • 2016: 41.7
  • 2017: 35.7
  • 2018: 32.1
  • 2019: 30.1
  • 2020: 30.0
  • 2021: 29.5
• Net international investment position (percent of GDP):
  • 2016: -85.6
  • 2017: -75.9
  • 2018: -72.0
  • 2019: -72.8
  • 2020: -72.1
  • 2021: -71.7
  • 2022: -71.1
  • 2023: -69.5
• Gross domestic investment (percent of GDP):
  • 2016: 26.5
  • 2017: 26.2
  • 2018: 27.0
  • 2019: 27.7
  • 2020: 26.7
  • 2021: 26.8
• National saving (percent of GDP):
  • 2016: 23.1
  • 2017: 24.7
  • 2018: 24.5
  • 2019: 23.7
  • 2020: 24.4
  • 2021: 24.8
• General government primary balance (percent of GDP):
  • 2016: 2.5
  • 2017: 1.7
  • 2018: 0.2
  • 2019: 3.2
  • 2020: 3.1
• General government overall balance (percent of GDP):
  • 2016: 0.5
  • 2017: -0.3
  • 2018: 0.4
• Overall balance 2/ (percent of GDP):
  • 2016: -3.9
  • 2017: -1.2
  • 2018: -0.8
• Gross public and publicly guaranteed debt (percent of GDP):
  • 2016: 53.5
  • 2017: 53.4
  • 2018: 51.7
  • 2019: 54.1
  • 2020: 55.4
  • 2021: 55.7
  • 2022: 56.0
• Nominal GDP (billions of U.S. dollars):
  • 2016: 47.7
  • 2017: 54.4
  • 2018: 59.6
  • 2019: 62.4
  • 2020: 65.2
  • 2021: 67.6
  • 2022: 70.1
  • 2023: 73.8
• Nominal GDP (billions of BYN):
  • 2016: 94.9
  • 2017: 105.2
  • 2018: 121.2
  • 2019: 130.3
  • 2020: 141.1
  • 2021: 150.1
  • 2022: 159.1
  • 2023: 168.2
• Terms of trade, percentage change:
  • 2016: -5.2
  • 2017: 1.1
  • 2018: -0.4
  • 2019: -0.7
• Real Effective Exchange Rate:
  • 2016: -9.2 ( "-" denotes a depreciation)
• Nominal Effective Exchange Rate:
  • 2016: -17.5 ( "-" denotes a depreciation)
  • 2017: -4.9
• Official reserves (billions of U.S. dollars):
  • 2016: 6.6
  • 2017: 7.1
  • 2018: 7.5
• Months of imports of goods and services:
  • 2016: 1.6
• Percent of short-term debt:
  • 2016: 46.4
  • 2017: 75.3
  • 2018: 68.1
  • 2019: 71.9
  • 2020: 71.0
  • 2021: 70.7
  • 2022: 70.6
  • 2023: 70.4
• Quota (2016): SDR 681.5 million (923.5 million U.S. dollars)

Source: IMF Executive Board press release, January 17, 2019.

References

• https://www.imf.org/-/media/images/imf/bios/imfboard.jpg
• The Executive Board
• Republic of Belarus and the IMF
• Russian Federation and the IMF
• IMF Policy Advice -- A Factsheet
• Press Releases
• PRESS CENTER
• http://www.imf.org/external/np/sec/misc/qualifiers.htm.
• http://www.imf.org/external/np/sec/misc/qualifiers.htm.
• https://www.imf.org/en/home