Belarus overview

Cityscape at night

The European Bank for Reconstruction and Development has adopted a new four-year strategy for Belarus, which outlines the Bank’s investment priorities in the country.

The strategy notes that in the recently changed regional geopolitical environment Belarus has engaged in greater international openness and become more willing to discuss domestic political developments, including the human rights situation in the country.

These positive developments, as well as the international response to these steps, have created a new political context for the Bank’s operations in the country and provide an opportunity for enhanced engagement with the Belarusian authorities.

In Belarus we focus on:

The EBRD is prepared to support concrete reform initiatives of the government with investments and technical assistance to develop the private sector, promote privatisation and enhance the sustainability of public infrastructure through commercial solutions. The strategy identifies the following strategic areas:

  • Enhancing the competitiveness of the real economy: The EBRD will seek to provide long-term debt and equity financing to local and foreign investors as well as support small and medium-sized business (SME) lending through the development of a sustainable commercially oriented banking sector. It will continue providing advice to SMEs to strengthen their competitiveness. The Bank will also promote the privatisation of state-owned enterprises by strategic investors, which can provide capital and know-how to improve competitiveness and productivity.
  • Enhancing the sustainability and service quality of public infrastructure: The EBRD will encourage private sector participation in the provision of public infrastructure services. The Bank will also seek to support well-defined reform initiatives of the government in the municipal, transport, power and energy sectors through its investments and technical assistance. Implementing these directions consistent with the Bank’s Green Economy Transition (GET) approach, the EBRD will also seek to assist Belarus’ transition to a low carbon economy, where public and private investments are made in a way that minimises the impact of economic activity on the environment.

As well as being a country where the EBRD works, Belarus is also a donor and a beneficiary of the Northern Dimension Environmental Partnership (NDEP) and benefits from investments in water supply and wastewater treatment.

The EBRD’s latest Belarus strategy was adopted on 7 September 2016

GDP forecast for Belarus’s Real GDP growth in 2017 -0.5 per cent

GDP forecast for Belarus’s Real GDP growth in 2018 1.0 per cent

Belarus’s GDP contracted by 2.9 per cent year-on-year in the first nine months of 2016, with negative growth in major sectors of the economy, including manufacturing, construction and trade. Recession in Russia continued to expose the Belarus economy to headwinds through trade and financial linkages. Inflation was on a declining path amid moderation in wage growth and generally tight monetary and fiscal policies.

In the first quarter of 2016, the Belarus rouble depreciated against the US dollar by 8 per cent against the backdrop of a widened current account deficit. The exchange rate stabilised in the second and third quarters of the year. Foreign currency reserves increased somewhat in the first nine months of 2016 but remained low, providing approximately one month of import coverage.

From the second quarter of 2016, the National Bank of Belarus started to ease monetary policy by reducing the refinancing rate from 25 per cent to 18 per cent between April and August 2016. The general government balance was in surplus in the first eight months of 2016, with the surpluses earmarked for repayment of foreign exchange liabilities and payment under the government’s guarantees to banks. The devaluation of the Belarus rouble in 2015 and in the first quarter of 2016 had a knock-on impact on the financial sector balance sheets.

As of the end of the second quarter of 2016, dollarization of the financial sector liabilities increased to 75.0 per cent and the National Bank of Belarus reported a ratio of NPLs to total gross loans of 13.4 per cent, up from 4.4 per cent in the beginning of 2015. Directed and subsidised  lending programmes continued to represent a tool of the government’s economic policy.

As in our previous REP, we expect Belarus’s economy to contract by 3.0 per cent in 2016 before growing by 1.0 per cent in 2017.

Belarus in the EBRD’s 2016-17 Transition Report