Experts' Forecast: Change In Power Will Save Belarusian Economy From Crisis

The country needs new elections.

The last year of 2020 was very difficult for the Belarusian economy. But the new year of 2021 might be even more difficult. Belarusian economists have told this to Belsat.

According to experts, two basic scenarios will determine the economic development in 2021. Under the first one, the political crisis will not be solved, while under the second one - it will be overcome. Such indicators as inflation and exchange rate of the national currency will depend on these scenarios, analyst of the BusinessForecast.by research group Aliaksandr Mukha stressed.

According to him, the ruble rate will exceed Br3 per dollar under the first scenario. Payments on foreign and domestic debts, denominated in foreign currency, will have a significant pressure on the exchange rate and the foreign exchange reserves. Aliaksandr Mukha stresses that the gross external debt of Belarus residents is already close to its historical maximum having amounted to $40.561 billion on October 1. And the payments of the principal debt and interest, scheduled for 2021, amount to $16.379 billion.

"Obviously, it will be extremely difficult to refinance and pay this in the normal course of time under the political crisis and sanctions pressure from Western states. There could be a significant increase in overdue foreign debt, which cannot but be worrying. From an economic point of view, next year will be one of the most difficult years in decades. And in terms of repayment of foreign debt of residents of Belarus, the next year will be the most difficult in the history of Belarus," - the analyst of BusinessForecast.by stated.

Moreover, the increased outflow of the foreign capital from Belarus along with the possible outflow of the foreign currency deposits from the banking sector of the country can only add more fuel to the fire.

"For example, there are irrevocable deposits, which can't be simply withdrawn, but sooner or later their terms expire. And if the political crisis is not solved, with a high probability, we can predict further withdrawal of foreign currency deposits from Belarusian banks with all the consequences," - the economist said.

Income Decline

Aliaksandr Mukha also predicts that in 2021, there could be a fairly deep drop in disposable income, both in real terms (prices will rise faster than incomes) and in dollar terms. This could lead to increased social and political discontent in the country.

"Belarus lags significantly behind the Russian Federation, not to mention the Baltic States and Poland in terms of average wages. Moreover, there is a possibility that given the possible devaluation of the Belarusian ruble against the dollar, Ukraine may leave Belarus behind in terms of average wage next year," - the economist said.

Senior Researcher of the Belarusian Economic Research and Outreach Center (BEROC) Leu Lvouski expects stagnation in the economy in 2021.

But "if there is a trigger and people start to withdraw deposits from banks actively again," there could be a financial crisis, as "the share of bad assets and loans is on the verge, and the banks are desperately short of liquidity". If the ruble tightening of loans continues, there may also occur a crisis of non-payments, as a result of which enterprises will not be able to continue their activities. This will involve their partners and counterparties.

"If some political conflict with Russia happens on top of that, it could lead to a crisis related to our national debt. If Vladimir Putin gets on his high horse and quarrels with Aliaksandr Lukashenka, it could put the resources of the system on edge," - Leu Lvouski says.

Lots of negativity.

In general, according to Lvouski, the U.S. sanctions may play a significant role. The expert thinks that they can lead to "serious problems at certain enterprises or adjust the regime's policy", making enterprises toxic.

The change of power will improve the situation in the economy

However, the situation can significantly improve if the political crisis is overcome. In this case, we are talking about a complete change of power, new elections and a comprehensive settlement of the political crisis, Aliaksandr Mukha believes.

In this case, according to him, "residents of Belarus will be able to access the external borrowing on fairly comfortable terms and pass the schedule of payments on foreign debt as planned. The new government of Belarus may have access to serious resources of international financial institutions, including the IMF. We are talking about at least several billions of dollars. It may also open the way to issuing new Eurobonds to support the economy and the implementation of structural reforms.

The level of inflation and devaluation under the second scenario will be noticeably lower compared to the first one. Inflation and devaluation expectations would decrease significantly.

"The faster the current political crisis is solved, the less negative effects on the national economy and the Belarusian society in general will be," - Aliaksandr Mukha stressed.