Leu Marholin: There are no prerequisites for economic growth now

The government writes its forecasts randomly: now all the failures can be attributed to external factors.

The forecast of Belarus’ socio-economic development has been drawn up on the basis of oil cost at $45 per barrel, the growth of Russia's economy at the level of 101% and the exchange rate of the 70 Russian rubles against 1 US dollar; whereas the Belarusian budget for 2017 has been calculated on the basis of conservative approach: the average price of oil - $35 per barrel, with a further contraction of the Russian economy (99% compared to 2016) and the exchange rate of the 75 Russian rubles against 1 US dollar.

These figures the Belarusian Prime Minister Andrei Kabiakou voiced at a session of the Presidium of the Council of Ministers, which was held in Minsk on August2. The Presidium of the Council of Ministers discussed the projects of the forecast of the socio-economic development for 2017 and the parameters of the main indicators for 2018-2019, the main trends of the monetary policy of the Republic of Belarus and the national budget for 2017. One cannot help but notice that the basic indicators that the two documents are based on contradict each other.

Why did it happen? The EuroBelarus Information Service tried to find out the cause of conflict, together with economist Leu Marholin.

- How could it happen that the two most important financial documents – for the five-year period and for one year – are based on completely different numbers?

- Only their authors can give an exact answer. I believe that in this case two factors came together. First - desynchronization: one document was developed earlier, another one – later; secondly – the budget has been prepared by the Ministry of Finance, but the forecast of Belarus’ socio-economic development – by the Ministry of Economy. These two ministries do not always correlate with each other.

- The budget for 2015 provides for 1.5% growth of the GDP, for 1.2% of people’s incomes, 3.6% of exports of goods and services. Direct foreign investments should amount to $1.4 billion, inflation – to 9%. Can we seriously talk about the economic growth planned for 2017?

- I think that we cannot. The ministries themselves don’t really believe in them. We have repeatedly witnessed the fact that ministries or governments have been developing some forecasts, but these forecasts were followed by Lukashenka’s outcry that it is not enough! And after that all the forecasts were changed into something more optimistic.

The authors themselves don’t really believe in the forecasts, and they have also realized that they won’t face any punishment for miscalculations. If earlier no one was afraid to guess the numbers, now everyone makes excuses about the crisis, about the situation in Russia and believe that everything can be attributed to external factors. I believe that all forecasts are written randomly.

- Do objective indicators for the first half of 2016 give reason to believe in if not growth, then at least in reaching point zero?

- As one of the Belarusian economists noticed: in our case, even small growth cannot be considered a signal that the bottom has been passed and the economy will grow. The Belarusian economy is in stagnation, which means that even if growth appears for one year, next year there can be fall again. Since the indicators don’t go beyond statistical inaccuracies, any figure can be drawn. Serious reasons to speak about the possible growth of the economy require serious action: either radical economic reforms, or fundamental changes in Russia, which is the largest market for Belarusian products. For now there is neither one nor the other.

- The National Bank decided to reduce the refinancing rate from 20% to 18% per annum as from 17 August. The interest rate on standing and bilateral operations designed to keep up the current liquidity of Belarusian banks will be reduced from 25% to 23% per annum. Is the decision of the National Bank justified?

- I think it is justified. The National Bank has managed to contain inflation in quite decent frames. Based on that, the refinancing rate is also lowered. National Bank hopes that once the rate is more or less acceptable, the companies will immediately turn for loans, investments start immediately and rapid growth begin.

The refinancing rate and access to loans is an important factor, but not the only and not the most important. To turn for a loan to the bank, one should produce competitive products, make it competitive by price, and find a market for it. And if none of this exists, no one will turn for loans, no matter how cheap they are. The authorities don’t seem to understand it.