What happens with economy if government decides to butter up Belarusians

The weakening of the Belarusian ruble and uncertainty about oil supplies promise a difficult year for the Belarusian economy. Also, the presidential elections are to be held no later than August 30, 2020. What happens if the authorities decide to butter up Belarusians with wage increases amid unfavorable external conditions? Should we stock up on gasoline and prepare for devaluation now?

"I've recently given a lecture, and a student asked me if it was true that after August the dollar will cost five rubles. Uncertainty about oil also develops into hysteria. Well, Belarusians have fears: the longer everything is calm, the worse scenario we should prepare for," says Director of the IPM Research Center Aliaksandr Chubryk. 

Over the past three weeks, the Belarusian ruble has depreciated by 9 kopecks against the U.S. dollar, which is about 4%. The expert notes that last year the ruble cheapened faster. So, it's no more than a seasonal phenomenon, and not in the most severe form. 

"There's no need to talk about something extraordinary happening on the currency market. There's no devaluation in annual terms. Not in the short term, either. These are not historical highs," says Chubryk.

The IPM considers it unlikely that salaries will significantly grow in 2020. 

According to their forecast, in 2020, the average annual salary will reach 1,165 rubles, in 2021 it will increase to 1,225 rubles, in 2022 - to 1,285 rubles. The research center predicts a further decline in inflation: to 4.5% this year and next year, and to 4% in 2022.

What will happen to the GDP?

In December 2019, experts predicted 1% GDP growth in 2020. Today, this forecast has been almost halved -- down to 0.6%. Deterioration is primarily due to the reduction of revenues from oil refining.

"The price of oil for Belarus rose from 65% of the world price in 2015 to about 80% in 2019," says Chubryk. "This year, the price of oil supplies from Russia will rise to 83-85% of the world price".

In this case, Belarus will have to reduce oil imports to about 15-15.5 million tons from 17.6 million tons in 2019. Accordingly, the refineries will not be loaded at full capacity.

"The economic cycle has been in the negative zone for almost a year -- since March last year. There are no reasons to expect accelerated growth, and there is no sharp slowdown either. There is neither pessimism nor optimism in the forecasts", sums up Alyaksandr Chubryk.

At the same time, negative shocks may reduce economic growth to zero or lead to a recession. For example, Belarus has no contracts for the supply of potash fertilizers to China yet. The situation is complicated by the outbreak of the coronavirus. This may have a negative impact on the economic growth rate, both globally and in Belarus.