Page 8 - BELRptSept18

3.0 Macro Economy 3.1 Macroeconomic overview
Belarus' GDP grew by 4.4% year-on-year in January-July , following a 4.5% y/y growth in the first half of the year, and a 4.7% y/y growth in January-May, according to the national statistics agency Belstat. The Belarusian economy is recovering well on the back of the ongoing recovery in neighbouring Russia, which saw 1.8% growth in the second quarter , the country's main trade partner. Belarus' GDP grew by 2.4% y/y in 2017 after two years of recession. It contracted 3.9% y/y in 2015 following 1.6% y/y growth in 2014. In April, the International Monetary Fund (IMF) revised upwards its GDP growth forecast for Belarus from 0.7% (October's forecast) y/y to 2.8% y/y. Meanwhile, Fitch believes that could accelerate further to 3.5% y/y in 2018 supported by reduced external financing constraints, growth in Russia and other trading partners and strong domestic consumption and investment performance. Fitch expects growth to moderate to 2.5% y/y and 2% y/y in 2019 and 2020. However, the nation's large public sector (estimated at 47% of GDP in 2017) with high leverage and productivity challenges weighs on medium-term growth prospects, which is a rating weakness.
The services sector should be the GDP growth driver in Belarus, First Deputy Prime Minister Alexander Turchin in an interview with the Belarus 1 TV channel on 26 August. The Belarusian president has set forth a big task, namely to ensure the GDP in the amount of $100bn by 2025. The growth drivers, according to Alexander Turchin, are the services sector, primarily the IT sector, and also the transport and logistics industry.
Belarus' economic growth was higher than expected in the first half of this year topping 4.5%, which is almost twice the 2.8% forecast at the start of the year. The government is using the windfall to pay down external debt early and meet its major social and economic development targets, Belarus Prime Minister Andrei Kobyakov said at a government meeting on August 2.
All regions have reported an increase in the gross regional product and productivity the prime minister said. Processing manufacturing expanded by 7.9%, construction by 7.5%, trade (wholesale and retail) by 7.8%. Agriculture and transport went up by 3.9% and 3.7% respectively. Production of machinery and equipment surged by 19.2%, transport vehicles by 13.7%, woodworking products by 14.8%, and pharmaceutical products by 11.9%.
The Belarusian government has dramatically revised downward its forecast for the country’s GDP growth in 2019 from 4.5% year-on-year to 2.1% y/y, according to the nation's new Economy Minister Dmitry Krutoy.
According to Belarusian officials, the new forecast take into account recent changes in the external economic environment, including changes in oil prices and the economic situations of the country's major trading partners, specifically, in Russia, and the values of their currencies.
According to Krutoy, the target scenario was initially based on an oil price assumption of $70 per barrel, but the assumption was eventually reduced to
8 BELARUS Country Report September 2018 www.intellinews.com