Page 60 - Eastern Europe Outlook 2020

December, which is forecasting an acceleration 2.5% growth for 2020, which is an optimistic forecast.
Growth slowed in 2019 to about 1.1% mainly due to the slowdown in the Russian economy. But there could be more problems in 2020 even though the Russian economy is expected to pick up in that year, which will be the determining factor for the Belarussian economy.
“Growth is subdued due to one-off factors and structural weaknesses, but also given rather weak performance of the Russian economy. Moreover, there are negative implications from the oil tax manoeuvre on Belarus growth and we observe stagnation in industry. Finally, there are yet no precise agreements between Belarus and Russia on the progress of deeper integration. All these challenges contribute to adjust our GDP forecast down to 1.5% in 2019 and to 1.8% in 2020,” Raiffeisen Bank (RZB) said in a note in December.
Belarus' GDP grew by 3% y/y in 2018 after a 2.4% y/y expansion in 2017 after two years of recession. It contracted 3.9% y/y in 2015 following 1.6% y/y of growth in 2014. Growth is expected to sharply decelerate in 2019 to 1.1%.
Inflation is under control, after slightly above 6% readings declining in October; this enabled two key rate cuts in 2019 (in August down to 9.5% from 10% and in November to 9.0%). RZB expects inflation to remain close to the central bank target of 5% or even lower.
FX reserves at a historic high $9.2bn in 2019 cover three months of imports. The Belarusian ruble is trading with appreciation.
The Belarusian government is very optimistic about economic growth in 2020 and its forecasts have been met with scepticism by other analysts. The government forecasts the nation's GDP will grow by 0.7% year-on-year in the first quarter of 2020, by 1.6% y/y in the first half of the next year, 2.2% y/y in January-September, and by 2.8% y/y over the year.
The Belarusian economy grew ​by 1.1% y/y in January-November​ following the same growth in January-October, according to national statistics agency Belstat.
In August, the International Monetary Fund (IMF) forecasted that the nation's economic growth in will be at 0.3% y/y in 2020.
In December, the European Bank for Reconstruction and Development (EBRD) revised downward its forecast for the growth of Belarus' real GDP in 2019 to 1.3% y/y from 2% y/y. The multinational lender also forecasts GDP growth of 1.2% y/y in 2020 (vs 1.8% y/y in its May's forecast).
In May, the EBRD said that, "risks to the outlook have increased" for the Belarusian economy. "The new energy taxation system being introduced by Russia, the so-called 'tax manoeuvre,' could significantly reduce revenues of Belarus' oil refining industry, thus affecting the fiscal balance and reducing economic and export growth." The IPM Research Center, a Minsk-based think tank, expects economic growth of 1.2% y/y in 2019, 1% y/y in 2020 and 0.8% y/y in 2021, if Russia does not recompense Belarus for the tax manoeuvre.
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