Point of view: Belarusan economy cannot withstand further growth in salaries

Lack of Belarusan exports’ variety makes wage growth impossible due to problems with sales in Russia. Moreover, Belarus’ economic authorities are no longer obliged to prove economy’s social successes.

In September 2014, the gross wage in Belarus was BYR 6 335 300 (circa USD 598). Wages have continued to fall for the second month in a row. Adjusted for inflation, real wages have declined over the past two months by more than 4%. Pay raises in education and healthcare have softened the general fall in wages in other economic sectors.

Wages cannot increase any more due to sales difficulties on domestic and foreign markets. Devaluation of the Russian ruble has meant that the investment activity of Russian companies has slumped, resulting in a 15-20% drop in sales for some Belarusan mechanical engineering products. Russia’s foodstuffs embargo has created conditions for Belarus to increase her food exports, but the sharp depreciation of the Russian ruble has resulted in significant losses in currency proceeds for Belarusan exporters.

Belarusan exports are poorly diversified and depend mainly on the Russian market. Belarus’ dependence on the Russian market is low only in the chemical and oil refining industries. Only domestic food and fuel have a considerable share in total sales on the domestic market. Most non-food products are imported on the Belarusan market.

Before the 2010 elections, gross wages in Belarus were artificially increased so as to demonstrate the benefits of the country’s economic policy. This has resulted in economic imbalances, current account deficit and, ultimately, in a significant devaluation of the national currency.

By 2015, the economic environment will have changed. The economy is no longer required to demonstrate a significant growth. Amid falling wages in Russia, wages in Belarus in some industries have caught up with those in Russia. Salaries of social workers in Belarus will grow, but simultaneously social benefits will be cut. Society will be satisfied with low incomes and a stable socio-economic situation in the country.

The Belarusan economy cannot withstand further growth in wages. The government will not raise the population’s standard of living artificially, and stagnation in the Russian economy will prevent a labour outflow from Belarus.

The article was published at Solidarity with Belarus Information Office