Uladzimir Kavalkin: Drop in income? Salaries are finally becoming adequate to the economy state

Income may drop even a little bit more, but it will not be anything dramatic - within a few percent, expert believes.

The official statistics confirms the drop in income of the Belarusians. According to the National Statistical Committee, the real income of the population in January-August 2016 has decreased by 7.1% compared to the same period last year. It is the biggest drop in the last 20 months.

Uladzimir Kavalkin, an expert on the problem of state service reform and the head of the “Cost of government” project within the BIPART project told it in his interview with the “EuroBelarus” Information Service that  "in the next year, year and a half there will probably be a stabilization of the income fall,  income fluctuation will be about zero."

- Income may even drop a little bit more, it’s possible that it grows a bit, but the changes will not be anything dramatic. Rather, it will be within a few percent, same as the Belarusian GDP changes.

- So should the Belarusians expect neither a return to the previous level of quality of life anytime soon, nor the at least five hundred dollars salaries? 

- In my opinion, that so-called high level of income of $ 500 or of 1,000 dollars as once promised by State is not income made by our economy. That level of revenue was achieved primarily by means of emissive crediting, directed lending of economy. Let’s recall what the purpose of getting foreign loans was. The money was put into a so-called modernization of the national economy. For all the good it did, because the competitiveness of the companies’ production was not increasing, new equipment though purchased was often used ineffectively: it was simply lying in storage for some time.

  - But there were dozens of various modernization, revival programs and the like. And all for nothing?

- It’s very easy to trace even a little success in the actions of the government in Belarus. If at the start of a program Government was talking a lot about the future results and at the final stage there is silence it means the program has failed. If the discussion continues, then something was at least partially accomplished, that is the officials are trying to "sell" their successes to the head of state and the society. Here is one of the few Belarusian success stories: Valery Tsepkala is proudly continuing to talk about his pet project – High Tech Park, about bringing in investments, taxes payment and so on.  But the modernization programs - where are all the discussions about them? There is none, because question about how the money was spent and why there is none left without any effect on a modernized field will appear.

- So what can the Belarusians hope for? Or should they accept this drop in income as something inevitable and long-term?

- Revenue growth was primarily associated with emitting fiat money in the economy. When this possibility was gone topped with the economic crisis in Russia, which is the main buyer of our products, Belarusian salaries got to correspond with the level they were supposed to maintain. If you trace the dynamics of the Belarusian economy, it becomes more or less efficient and competitive in global market at the time when an average Belarusian salary is between 320 and 350 dollars. Now it is a little bit higher, which makes it possible for us to talk about a possible further drop in real income, though insignificant one. We are close to the equilibrium situation.

If the government continues to adhere to the policy of macroeconomic equilibrium, long term economic growth is possible. But this requires a number of reforms. I.e., in short and medium term - a year or two or three – it’s no use to hope for the salaries to rise. In the long run it all depends on the steps and reforms government will implement today.  

- So far only the National Bank seems to be consistent in its politics.

- Fortunately, the Council of Ministers has already joined the National Bank, which I think has been obvious for the last year. Today the government at least in broad lines has the matrix of measures to resolve the situation faced by our economy. We can say that all the proposals put forward in the last 15 years by the International Monetary Fund were carefully studied and some were integrated in the matrix of measures for situation stabilization. Of course it would be much more efficient to implement it in 2007, but we have to do it now – with the background of external shocks: the fall of Russian market, worsened debt crisis, etc. But it’s better late than never.