Authorities Wait for Cause to Start Dialogue
On February 12th, Belarusian delegation headed by Minister of Foreign Affairs Vladimir Makey took part in the second round of the informal ministerial meeting within the Eastern Partnership held in Tbilisi.
Minsk has publicly demonstrated its willingness to resume political dialogue with the EU. However, the results of the meeting in Tbilisi say that Belarus has not yet received sufficient guarantees for the resolution of the current political conflict from its Western partners and waits for favorable conditions to resume the dialogue.
Belarusian delegation’s participation in Tbilisi meeting aimed at creating frameworks for potential negotiations with the EU in 2013. The framework will be the Eastern Partnership Summit, scheduled for November in Vilnius. Multilateral negotiations within the Eastern Partnership is a preferred format for Belarus, because it allows retouching bilateral claims of the EU and the U.S. regarding political prisoners, and securing the support by other Eastern Partnership participants, for instance, regarding participation in the EURONEST, EaP Parliamentary Assembly.
The authorities seriously consider their participation in the Vilnius summit and even more – resuming negotiations with the EU using the EaP platform. The scheduled for February 20th-23rd visit of the Belarusian parliamentary delegation to Vienna to participate in the OSCE PA session also confirms this assumption, as well as participation of the President’s Intelligence and Analytical Centre Deputy Director in the OSCE conference “Internet 2013 – Shaping policies to advance media freedom” on February 12th.
Finally, on February 14th Deputy Foreign Minister Mr. Kupchina met with Eastern Policy Director of the Polish Foreign Ministry Ms Figel and Polish Ambassador to Belarus Mr. Sherepka in Minsk. Meeting details were not disclosed, official reports said, that the parties discussed Belarusian-Polish relations and other issues of mutual interest.
Failure of the authorities to release and rehabilitate political prisoners implies that President Lukashenko, on the one hand, thinks the moment is not right to resume a political dialogue with the West. (In 2008 the Georgian-Ossetian military conflict was the triggering moment). On the other hand, it is likely that the Belarusian authorities do not consider the proposed potential financial bonuses and guarantees sufficient and therefore not entailing the release of political prisoners.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.