Instability in Belarusians’ economic well-being directly affects President’s ratings

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April 22, 2016 18:13

A national survey conducted in July by the Independent Institute of Socio-Economic and Political Studies has shown a slower growth in public optimism. The President’s electoral rating has declined; however, there is no rise in protest moods.

Comment

Alexander Lukashenko’s fourth term in office is characterised by significant changes in public moods. In comparison to the previous term, fluctuations in the Belarusian people’s economic situations immediately affect the President’s rating and level of trust toward state bodies. However, such instability of public opinion does not influence the Belarusian people’s protest potential and presents no threat to the state order.

In contrast to Aleksander Lukashenko’s third term in office in 2006-2010, when his rating was about 40%, since 2010 the Belarusian leader has much less support from his voters. According to a survey carried out by IISEPS in June, only 29.7% of the respondents are ready to cast their votes for Lukashenko, while in March 2012, the electorate’s support equaled 34.5% (in December 2011 - 24.9%).

The most likely reason for this decline is the worsening of the economic well-being of citizens: in June, only 12.8% of the interviewees noted an improvement in their financial situation compared to 15.3% in March 2012.

However, sociological surveys do not register any rise in the popularity of alternative politicians or increased protest moods among society.

According to the same poll, the electoral rankings of Andrei Sannikau and Uladzimir Nyaklyaeu are 6.8% and 6.1% respectively, which is more likely explained by the inertial effects (After his release from prison in April 2012, Sannikau withdrew from public policy). The number of people who associate themselves with the opposition is at the usual level of 19.2% (against 22.6% in December 2011)

On the one hand, these figures prove a well-known opinion that despite expectations of changes, the majority of the Belarusian people do not see an alternative candidate among the opposition politicians. Consequently, they are not ready to participate in protest campaigns, for example, in street actions.

On the other hand, the link between the fluctuations in citizens’ economic well-being and the level of trust toward state bodies proves the opinion that after the 2011 financial crisis, the Belarusian authorities have only one effective tool to maintain and enhance people’s loyalty: to constantly increase welfare.

In such an unstable situation it should be expected that even a minor inflation hike or delay in wage or pension payment will lead to a further decline of public trust toward the authorities.

During 2011, several labour collectives at major Belarusian companies staged protests and as a result, their salaries were increased. If there is a new wave of economic crisis, these non –political protests are highly likely to occur again. Thus, if the Belarusian authorities fail to find funds to increase salaries quickly, social protests might theoretically grow into something bigger.

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

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.