main risks for belarussian economy and prospects for ...60 70 80 90 0 10 20 30 40 50 60 70 80 90 100...
TRANSCRIPT
Workshop “Economic Environment for Businesses”
Minsk, December 14, 2016
Bas B. Bakker
Senior Regional Resident Representative
for Central and Eastern Europe
Main Risks for Belarussian Economy and
Prospects for Belarus-IMF cooperation
Global growth has hovered around 3¼ percent
in recent years, well below pre-crisis levels.
2
GDP growth
(percent)
-4
-2
0
2
4
6
8
10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Emerging markets
World
Advanced economies
-10
-8
-6
-4
-2
0
2
4
6
8
10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
In CESEE, non-CIS is doing better than CIS
3
GDP growth
(percent)
CESEE non-CIS
European CIS
Indeed, significant differences in growth
between CIS and non-CIS CESEE
4
-16
-14
-12
-10
-8
-6
-4
-2
0
Ukraine Belarus Russia
Along with Russia, the rest of CIS also suffered
from recession in 2014/15
Spillovers from Russia
Collapse of commodityprices
Sudden stop in capital flows to Russia, result of sanctions on Russia
Conflict in Ukraine
5
Change in GDP
(percent)
Between
2013-15
Between
2013-16
-5
0
5
10
15
20
25
30
2004 2006 2008 2010 2012 2014 2016
Exchange rate depreciation increased
inflation and reduced real wages
6
CPI Inflation in European CIS
(percent, weighted average)
max
min
0
250
500
750
1000
Mar-10 Mar-12 Mar-14 Mar-16
RUS
UKR
BLR
USD 500 line
Average monthly wages
(USD)
-20
-15
-10
-5
0
5
10
15
2005 2007 2009 2011 2013 2015
2016: Russia is recovering, helped by rising oil
prices.
7
-100
-75
-50
-25
0
25
50
75
100
-20
-15
-10
-5
0
5
10
15
2005 2007 2009 2011 2013 2015
RUS
Oil prices
(right axis)
Real GDP growth in Russia, other CIS countries and changes in oil prices
(percent y/y)
UKR
RUS
BLR
-12
-9
-6
-3
0
3
Demand Supply
-12
-9
-6
-3
0
3
Demand Supply
Statistical
discrepancy
-12
-9
-6
-3
0
3
Demand Supply
Belarus still in recession
8
Belarus Russia Ukraine
Domestic
demand
Exports
GDP
growth
Demand and supply components: contribution to GDP in 2016
(percent)
Imports
Forecasts for 2017: global growth
continues to be modest
9
GDP growth according to WEO Oct-16
(percent)
-6
-4
-2
0
2
4
6
8
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
World
USA
Euro Area
Forecast for 2017: Non-CIS similar as 2016;
pick-up in CIS; Belarus still in recession
10
-3
-2
-1
0
1
2
3
4
5
6
BLR RUS SVN HRV HUN EST UKR CZE BGR SRB LTU MDA BIH SVK UVK POL LVA MKD MNE ALB ROM
2016
2017
GDP growth
(percent)
Note: CIS countries in red.
Toward a sustainable
growth model
11
Investment to GDP ratio increased sharply in
the 2000s
12
15
20
25
30
35
40
45
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Investment rate
(percent of GDP)
Belarus
CE4
SEE EUBaltics
Domestic saving did not follow and external
imbalances reached unsustainable levels
13
15
20
25
30
35
40
45
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Investment
Saving
Investment and saving rates in Belarus
(percent of GDP)
The result was several BOP crises
14
-12
-7
-2
3
8
13
18
-40
-30
-20
-10
0
10
20
30
40
50
60
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Official reserves , rhs
(percent of GDP)
BYR/USD exchange rate
(monthly changes, percent)
Changes in exchange rate and official reserves
Exchange rate has now stabilized
15
40
50
60
70
80
90
100
Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16
BYR/USD
(Jan-2013=100)
Floating of BYR
Dep
reci
ati
on
How can we reignite growth?
16
-15
-10
-5
0
5
10
15
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
GDP growth in Belarus
(percent y/y)
-3
0
3
6
9
12
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Not by another investment boom; higher
productivity needed
17
Contributions to GDP growth
(2-year moving average, percentage points)
GDP growth
Capital
TFP
Labor
0
10
20
30
40
50
60
70
80
90
0 10 20 30 40 50 60 70 80 90 100
What sets Belarus from other countries is not
low employment, but low productivity
18
Em
plo
ym
en
t ra
te
(perc
en
t o
f w
ork
ing
ag
e p
op
.)
Labor productivity
(PPP adjusted 2014 USD, thousands)
Labor productivity and utilization, 2015
Flags size reflects GDP per capita in 2015 (PPP-adjusted).
Economic efficiency may be hampered by the too
limited role of the price mechanism in allocating
resources
19
Examples:
Absent hard financial constraint, many
state-owned enterprises are loss making
Household energy prices are below
cost-recovery levels
Losses SOEs create macro problem
They have to be compensated by
Higher fiscal expenditures
Or by cheap credit (directed lending)
20
Simply stopping transfers may create a
banking sector problem
SOEs need to be restructured
IMF providing TA on how to do this
Strong social safety net needed to cushion
adverse impact on unemployment
Growth-enhancing policies, such as lending
programs for privately-owned SME may help
The World Bank is working on a loan/project to
support SME lending.
21
Setting heating tariffs at cost-recovery levels and reducing cross-
subsidization means lower subsidies and more incentive to use
more energy-efficient technologies
22Source: IMF Staff Report, September 2016. Methodology for calculating cost-
recovery in Belarus has since changed.
The goal of reforms is to create a vibrant,
efficient economy
Reforms can certainly be painful in the short
run, but not transforming the inefficient
economy can have even larger costs
Example: in 1989 Poland and Ukraine were
equally poor. Poland pursued transition
reforms quickly, as opposed to Ukraine.
23
Today, Poland is three times as rich
Change in light during the night between mid 90’s and 2012-13,
based on satellite images
Note: the map shows the differences in intensity of brightness between the
averages of 1992, 94, 96-97 and 2012-13.
Thank you