Stanislau Bahdanovich: I can feel the breath of poverty already

Today there are no factors that ensure at least a minimum GDP growth in Belarus.

On April 28 the World Bank in Minsk presented the World Bank Economic Update for Belarus. Experts expect slight growth of the Belarusian economy as late as in 2018, while the forecast for 2016 has deteriorated.

Why did the World Bank downgrade the forecast for the Belarusian economy? Why do the Belarusian authorities, despite gloomy forecasts, build bright projections?

The former chairman of the National Bank Stanislau Bahdanovich answers the questions of the "EuroBelarus» Information Service.

- Belarus' GDP might decline by 3% in 2016, although just six months ago the predicted decline of GDP made 2.2%. What is the reason for such a sharp deterioration in the projection?

- It’s not very sharp: in the past year GDP fell by 4%, this year it may fall less. Recession is going on and revival is not in sight. The first quarter was unprofitable: the economy falls, productivity falls, the losses are growing, profitability is reduced, and incomes are falling. It seems that the World Bank downgraded the forecast with an allowance for all these factors.

No reforms and no external investment take place – there is no source of revitalization and growth. The program of socio-economic development of Belarus till 2020 provides for GDP growth within five years by no more than 10%, which is extremely little. We need to get such growth within one year. That is why the government and the President declared that they wouldn’t waste time for any impracticable dreams.

- However, contrary to forecasts, the official Minsk hopes that Belarus' GDP in 2016 will grow by 0.3%, and inflation won’t exceed 12%. What has caused such optimism?

- The authorities just cannot say otherwise. Fair and honest government, which is unable to stabilize the situation, should resign. But the Belarusian government isn’t going to resign.

The first quarter of 2016 demonstrated that the Belarusian economy is in the phase of a recession, not growth. In general, economy requires radical steps, recognition that the main problem is not outside but inside the country. Look, Poland is developing, Baltic States are developing, and even Ukraine stated economic growth by 1% in the first quarter. The economic downfall continues in Russia, with which we are tied by the export-import relations; if Russian economy isn’t developing, it can’t buy Belarusian products, and Russia is the only country that buys it. In order to win new markets we should have worked for the previous 20 years. All the mistakes of the current authorities come out.

- The World Bank believes that Belarus badly needs external lending, considering that we need to pay $3.3 billion of foreign debt as early as in 2016. What happens if the Belarusian authorities don’t find new loans?

- We will become poorer. I can feel the breath of poverty already: prices are rising, both on medicines, food, and essential commodities. Whereas pensions aren’t rising, they are not even indexed with an account for inflation!

The country will be able to pay off the external debt. National Bank will buy the currency at the exchange to pay off foreign debts, exchange rate will collapse, the cost of imports, including raw materials, will increase, the expenses will increase, the losses will increase, but the country won’t be destroyed.

All of us will face impoverishment.

- The World Bank believes that structural reforms can improve Belarus’ prospects in the medium term. Are any signs of reforms visible?

- Lukashenka said that the country won’t change the structure of economic management – it will only improve the useless model. Lukashenka won’t allow any reforms – this is one of the reasons why the IMF doesn’t want to give Belarus a loan. Loans are needed primarily for paying off external debts: if we get $3 billion we’ll pay off our foreign debt. And without external lending debts will be paid off at the expense of the population.

To develop the economy we need absolutely different steps: tax cuts and restructuring. We need to stop interfering in the small and medium business, where new manufacture can be launched with the help of few resources. Economy can be developed only with market methods, not administrative. Lukashenka has been shaking his fist at the government for a long time, but no one is listening.

- Thus, the economic growth of 0.3% projected by the World Bank in 2018 is unlikely without structural reforms, isn’t it?

- It’s hard to say. I always think of the government much better than it actually deserves. I hope that the government won’t just sit and do nothing. The government should leave business and stop the vicious practice of introducing new taxes and levies. If the authorities do nothing, we won’t see growth: the country will only face decline in production, even if not by 4%, as last year, but by 3-2%. Today there are no factors that ensure at least a minimum GDP growth in Belarus.