Demand for Belarus’ produce is lower the volume of production despite a huge decrease in output

Large enterprises will receive additional resources and retain staff, whereas a large part of excess production will be sent to warehouses.

Despite the slump in production, Belarusian industry increased its volume of stock in the first quarter. Low diversification of sales markets and the crisis in Russia were the main reasons for the low performance indicators. The government will provide financial support to large enterprises and additional goods will replenish the inventories.

 According to data from the National Statistical Committee of the Republic of Belarus (Belstat), the decline in industrial production in January-June 2015 amounted to 7.4%. As few as 2 out of 16 manufacturing sectors exceeded indicators for the same period of 2014. A number of large industrial enterprises (‘Zabudova’ OJSC, ‘KIM OJSC and Mogilev carriage works) suspended their activities. The slump in manufacturing production was accompanied by an increase in inventories of 16% or BYR 5.5 trillion in January-May 2015. Some of the inventories have been redirected to dealer warehouses outside of Belarus and are not included in the statistics on inventories. 

High performance indicators of the chemicals and refinery industries are related to diversification of sales markets and liquidity of production outside the CIS. Crisis-related phenomena in other industrial sectors are linked to the high share of production exported to Russia. Manufacturers of machinery, vehicles and equipment were the biggest losers, as the share of their sales to Russia exceeds 50%. The manufacturing of harvesters decreased 7-fold, TV sets – 4-fold, of buses and trucks – 2-fold. This produce is supplied outside the EAEU in small quantities. 

Regardless of the extent of state aid, Belarusian industry will show a decreased rate of production slump in the third quarter. This effect will be achieved due to the change in the 2014 comparative benchmark. The country’s economic authorities have decided to provide financial support to the largest industrial enterprises in order to retain their staff. Any growth in sales of produce for export is unlikely. A large part of the workforce is redundant. Against the backdrop of the failure in negotiations with the IMF, the country’s leadership may assign several trillions of rubles to these ends by way of emission. Budgetary financial resources will be earmarked for the purchase of raw materials and components in order to provide the workforce with work. Agricultural enterprises may be equipped with some of the technical solutions, with a long grace period. A major part of production not in demand will be sent to warehouses. As a result, the backlog in production will be reduced compared to 2014 indicators but stockpiles will grow rapidly (by BYR 1 – 1.5 trillion per month). 

Thus, the current demand for Belarusian produce is below the volumes of production despite a significant decrease in output. Large enterprises will receive additional resources and retain staff, whereas a large part of excess production will be sent to warehouses.

Solidarity with Belarus Information Office