Economic modernization as one of the main reasons for the negative trade balance
The foreign trade deficit in July 2013 was USD 446.5 million.
Implementation of extensive economic modernization plans has resulted in a slump in export growth performance in 2013. Modernization in Belarus entailed a sharp increase in capital equipment imports, disabling improvement in merchandise trade. In addition, negative developments in external markets will further increase the trade balance deficit.
The initial plan for export growth in Belarus in 2013 was 15.2 % as compared with 2012. In H1 2013 the forecast not only failed, but lagged behind 2012 exports by 20.7 %. In 2013 international trade was gradually deteriorating. In Q1 2013 the largest negative foreign trade balance was registered in February - minus USD 246.4 million. In Q2 the minimum value (minus USD 272.8 million) was in June and the maximum - minus USD 447.3 million – in April. July 2013 data repeated the worst result in 2013, when foreign trade balance was minus USD 446.5 million.
Compared with 2012, the lack of solvents and lubricants exports in foreign trade balance had a negative impact on foreign trade performance. Belarus lost USD 3.4 billion on lubricant exports and raw materials imports reduced by USD 2.4 billion. Compared with January-July 2012, in 2013 foreign trade balance fell by USD 4.2 billion, which implies that lubricant exports had significant, but not decisive, impact on the foreign trade performance.
The capital goods situation is also negative. In H1 2012, the trade surplus for this product group was USD 502.4 million and in 2013 trade deficit was USD 414.3 million. According to modernization plans, haulage companies have sharply increased automobile trucks imports to renew their fleet. Supplies of manufacturing equipment for the construction of dairy farms have increased, as well as power grid equipment purchases. Against the background of falling Belarus’ cargo and agricultural machinery exports to Russia, investment imports exceeded investment exports.
Economic modernization in Belarus meant to improve the competitiveness of Belarusian goods in foreign and domestic markets. However, so far, new equipment imports have not resulted in greater exports to international markets. Despite the construction of a large number of dairy farms, dairy exports have not increased – on the contrary, they have decreased compared with 2012. Over USD 1 billion was spent on modernizing cement plants, but only few were able to slightly increase their export volumes. A sharp rise in foreign currency proceeds should not be anticipated. Despite renovating power grids, electricity imports have not reduced. The competition is increasing on international markets (Russia and the EU) due to the economic slowdown, which results in Belarus losing its market shares due to the low competitiveness of Belarusian goods and services.
Thus, the foreign trade situation is deteriorating while modernization fails to bring positive results. The forecast is that the international trade situation will continue deteriorating, particularly bearing in mind problems with potash exports from Belarus.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.