Publically announced reason for delay of Lukashenko's annual message: a signal to the West that he wants to resume dialogue
On April 17, Presidential press office announced the indefinite postponement of the Annual Address of the President to the Parliament and the nation, previously scheduled for April 19. Lukashenko ordered further work on the substance of the message.
The main reason behind the shift is the issue of privatization of Belarusian enterprises. According to presidential press service, Lukashenko demanded to amend the “too liberal” approach to this cornerstone issue for Belarus in the address.
The country’s leadership seeks to circumvent the conditions of cooperation with the EurAsEC Anti-Crisis Fund, which envisages annual sale of state assets at USD 2.5 billion. It is also clear that managers of Belarusian enterprises increasingly fear for their future and, therefore they attempt to form various privatization lobbies. For instance, on April 12, Minister of Transport and Communications Mr. Scherbo said that the Belarusian air carrier “Belavia” could be sold to foreign investors after 2012.
Most likely, after losing in a conflict with Russia on air traffic parity, which has demonstrated Minsk’s incapability to defend its interests, President Lukashenko requires more time for coordination of means to protect Belarusian companies, as well as to neutralize dangerous for the country’s leadership initiatives, such as the one voiced by the Minister Scherbo.
Official reasons for putting off the address confirm our earlier assessment, that there is an acute shortage of exit strategies from the ongoing political and economic crisis.
Alternatively, the amendments to the text would have been made on a working level and not voiced publicly, or referred to different reasons behind the postponement (for instance, President’s working visit, as before).
Therefore, this move looks like a very adventurous and desperate attempt to enlist the support of the West in a trade conflict with Russia. The Press Office also emphasized that the foreign policy section would be amended as well, namely, the rhetoric in respect of foreign partners will be mitigated.
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.