The miracle of growth

A dramatic decline in output, following the collapse of central planning, was theoretically inevitable and empirically testified in all transition countries in the early 1990s.

Belarus was no exception. What makes Belarus peculiar is the combination of unreformed economy and high growth rates of 6-8 per cent in the past decade.

Belarus’ GDP did not contract even during the crisis of 2009 and recovered more quickly than in neighbouring countries ...more

 The growth is largely explained by the disciplined workforce and expansionary monetary and fiscal policies, mainly financed by large annual subsidies on energy imports from Russia, direct financial support from Russia and favourable prices for export commodities.

It is estimated that the rise in export prices for refined oil products and energy subsidies from Russia contributed to cumulative terms of trade gains amounting to about 35 per cent of GDP between 2000 and 2008. Yet, the cheap energy supply only aggravates the ineffectiveness of the Belarusian economy: the GDP per unit of energy use is two times lower than in the EU.

The recent arrangements with Russia, which granted low gas prices for Belarus (166 USD as contrasted by 400 USD per thousand cubic meter in the EU) are meant to be an important growth factor, masking, however, profound problems in the Belarusian economy.