Lukashenko ignored the CIS Summit in Dushanbe
Belarusian president fails to get the necessary support from the Russian leadership therefore he sent Mikhail Maysnikovich to take part in the Summit. Myasnikovich is accumulating and developing Eastern contacts, however he is also blamed by the president for failures with regard to Russia.
Instead of President Lukashenko Belarus has been represented by Prime Minister Mikhail Myasnikovich at the Anniversary CIS Summit.
A week ago in Sochi President Lukashenko had unsuccessful talks with Russian President Medvedev on the most pressing issues for Belarus therefore he was not interested in meeting him again. In particular, the parties have not agreed about a loan secured by the assets of “Belaruskali” or by the proceeds from the sale of government’s stake in Belarusian enterprises (first of all, “Beltransgaz”).
Therefore at the Summit Belarus has been represented by Prime Minister Myasnikovich, who continues gaining scores as a major Belarusian international negotiator. This Summit was the first highest level meeting he attended and could communicate directly with President Medvedev and other presidents of the CIS countries (the Summit was attended by 8 of 11 CIS presidents).
However, the authority of Myasnikovich is in the rigid frameworks set by the President Lukashenko and his inner circle of power structures. The president has the exclusive right to take decisions about the most crucial issues for the Belarusian economy (privatization, economic reforms). Work of Myasnikovich on the Eastern policy of Belarus will be interfered by the security forces close to the President.
For instance, the action plan made public on 30 August concerning stabilization of the currency market ignored the main requirement set by the main financial partners of Belarus (EurAsEC Anti-Crisis Fund and the IMF), i.e. to eliminate the multiplicity of exchange rates. Prime Minister Myasnikovich is responsible for negotiations with these organizations. However, the President appointed the State Control Committee and the Security Council, not the Government, as the principal implementers of the plan of action.
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.