Belarus Watch: GDP on a declining path, sanctions-hit still ahead
Despite Western sanctions pressure, Belarus' GDP grew by 2.3% in 2021. At the same time, the former GDP supporters such as domestic consumption and agriculture lost their influence, while industrial output and foreign trade became the main drivers of GDP growth in the past year.
| Sanctions retarded GDP growth |
 |
| National Bank of Belarus, Belstat, RBI/Raiffeisen Research |
| 12M 2021 Exports estimatimation |
According to the first official estimate, in 2021 GDP grew by 2.3% yoy and reached USD 57.6 bn. Throughout 2021, the main drivers of GDP were industrial production and foreign trade. Industrial output growth was mainly driven by the counting statistical effect of the “low 2020 comparison base”. At the same time, from the 11.1% yoy May high, the manufacturing growth rate declined to 6.5% yoy by the end-2021. The industrial deceleration may be caused by “2020 low base” effects diminishing and the rising prices of raw material exports. Regarding foreign trade, Western sanctions did not have a significant effect on it in 2020-2021. Moreover, exports grew by more than 33% and the foreign trade surplus of goods and services almost reached USD 4 bn, while the chronic foreign trade deficit of goods decreased more than 12 times to USD 0.12 bn in 11M 2021 vs USD 1.47 bn in 11M 2020.
Domestic demand used to be a significant factor supporting GDP. However, in 2021 it lost its importance. Retail was negative during 1H 2021. A slight 1.6% yoy retail growth failed to underpin GDP in H2 2021.
Simultaneously, in 2021 some previous years' GDP drivers lost their influence. Thus, agriculture and investment in capital had negative dynamics of -4.2% yoy and -5.6% yoy, respectively, by the end of 2021.
2022 may turn out to be more challenging for the Belarusian economy. On the one hand, Belarus retained its policy of no restrictive COVID-19 measures and abolished the measures adopted earlier, thereby supporting producers within the country. Likewise, Russian economic support persists via funding and providing access of Belarusian manufacturers to their domestic tenders. On the other hand, strengthening of the Western sanctions in 2022, primarily on the part of the United States, may lead to a significant foreign trade drop, and as a consequence, further reduction of GDP growth to 0.5% in 2022.
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Olga ZHEGULO
Belarus Olga Zhegulo is the head of the Belarusian research team. Since November 2018, she has joined the Priorbank team. She is responsible for economic development analysis of Belarus, preparation of analytical material and forecasts on the main macroeconomic indicators.
The US Fed has changed its interpretation of inflation. Hence, we have changed our expectations on the key rate path. In CEE, inflation continues to surprise to the upside (apart from EE) which leads to further interventions from governments and adds pressure on the central banks. As a result, we also lifted our key rate outlook for Poland. Else in focus: Talks between the US and Russia on Ukraine have not brought any tangible progress which results in ongoing political uncertainty. |