Belarus Watch: Positive GDP dynamics in January, moderate rebound 2021 expected

Despite 1.3% growth of GDP and 8.5% hop of industry output in January 2021, we we expect only a moderate economic recovery in 2021, given various factors.

Key economic indicators: Moderate recovery projected 2021
Belstat, RBI/Raiffeisen Research

In January 2021 GDP rose by 1.3% yoy, meanwhile, industrial output growth climbed to 8.5%. However, these positive data are based on a low comparative base. In January 2020, Russia suspended crude oil supplies to Belarus, so the refineries were loaded less than half of their capacity. In addition, there were no new potash supply contracts with the main trade partners from India and China in Q1 2020. While the oil refining and potash production are of key importance for the Belarusian economy. Thus, in January 2021 oil refining and chemical industries showed significant growth of 34% and 39%, respectively, thereby sustaining GDP. Apart from that, housing construction was another GDP supporter with 38% growth.

  • Meanwhile, the abolition of tax incentives for the IT sector and the relocation of its companies will continue to reduce the share of the IT contribution in GDP.
  • In addition, during 2020 many industries have been producing partly on stock, increasing their not yet sold inventories.
  • The last but not least, the political situation is still unresolved.

All these factors will continue to put pressure on the economy, so we do not expect significant economic growth, even if the pandemic is soon over, projecting economic growth at 1.5% yoy in 2021.