Belarus will not meet main socio-economic parameters in 2012

Foreign trade as a GDP growth factor has slowed down after suspension of solvent schemes. One option to fulfill the projected parameters was to actively stimulate domestic demand by money printing. Recent statement of the National Bank’s Head implies that in the current circumstances it would be impossible to fulfill the GDP growth plan in 2012.

On November 21^st National Bank Chairwoman Nadezhda Yermakova said it was unacceptable to print money to boost GDP growth.

In January-October 2012 the GDP growth was 2.2%. In October the GDP growth slowed due to suspended lubricants production in Belarus. Industrial output in Minsk shrank by 50%, which had a great impact on Minsk regional GDP and the country’s GDP as a whole.

Foreign trade as a source of GDP growth also will not improve GDP growth rate, both due to the high comparative base in 2011, and due to problems with main Belarusian exports. Potash exports, compared with autumn 2011, decreased and no new contracts were concluded. Oil refinery is decreasing due to reduced crude oil supplies. As a result, petroleum exports dropped. Volumes of biodiesel supplies reduced too.

Money printing could be one of the possible sources for GDP growth. Previously capital investment was an important source of GDP growth. As a rule, it was implemented via soft loans from emission funds. In the second half of 2012 National Bank’s monetary policy was eased, and the government could hope to use this mechanism to boost GDP growth.

Yermakova’s statement implies that this mechanism becomes unavailable, while there are no other sources for significant GDP growth. Domestic resources have been exhausted and cannot contribute to the GDP growth or even maintain it at a current level. Thus, bearing in mind the NB head’s statement and the lack of additional leverage to boost GDP growth, we draw a conclusion that projected 5-5.5% GDP growth in 2012 is not feasible.