Europe

Belarus
Last reviewed: 27 June 2008

Country information

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ECONOMY

Basic Economic Facts

GDP: US$36.900 million (2006, EIU data)
GDP per capita: US$3,803 (2006, EIU data)
Annual GDP Growth: 9.9% (2006, EIU data)
Inflation (Consumer Price Index): 7.0% (2006, EIU data)
Major Industries: machine building and metalworking, chemical and petrochemical, food, textiles, woodworking, radio-electronics, agriculture.
Major trading partners (2005): Russia, Latvia, Ukraine, Lithuania, Poland, Germany, UK, Netherlands.
Exchange rate: 1 GBP = 4,087 Belarusian roubles; US$1 = 2,141 Belarusian roubles (November 2006)

During the late Soviet period, Belarus developed a significant industrial base (defence industries, tractors, textiles, etc) and its population enjoyed a standard of living that was high for the USSR together with a high level of education. After the break-up of the Soviet Union, Belarus retained this industrial base. Agriculture is also a significant part of the economy.

After initial attempts to liberalise Belarus' post-Soviet economy, reform slowed under Lukashenko. The majority of all industry remains under the control of the state and is heavily regulated. Foreign investment has been limited due to an unfriendly business environment.

Lukashenko has based his economic strategy on closer relations with Russia, on which Belarus remains heavily dependent. This has yielded some benefits: some of Belarus' energy debts to Russia have been written off and others have been met on barter terms. Belarus has also benefited from the establishment of the CIS customs union. However, Putin has indicated that in the future Russia will not be so willing to prop up the Belarusian economy. Following the breakdown of negotiations to buy into the Belarusian gas transport network, the Russia state gas monopolist. Gazprom has indicated that from 2007 Belarus will have to pay market prices for gas (at present it pays $46.68 per 1,000 cubic metres).

Lukashenko has said this will cost Belarus an extra $200m a year. As a result of negotiations, the price of gas was set at $100 per 1,000 cubic metres and Belarus agreed to sell 50% of shares in Belarusian gas pipeline Beltransgaz to Gazprom. On 12 January 2007 Russia introduced an export duty of $52.7 per ton of oil. This will have a significant impact on Belarus's economy, as oil products, refined from previously duty-free Russian oil, formed an important part of the country's foreign trade and the state budget.

Given the Belarusian authorities' lack of commitment to economic reform, co-operation with international financial institutions has been difficult. The hesitant reforms started in 1993 enabled Belarus to reach agreement with the IMF on funds under the Systemic Transformation Facility (STF) and later, after difficult negotiations, under a Stand-by Agreement (SBA). Belarus almost immediately breached the policy conditions and the loan was suspended. The IMF Resident Representative was withdrawn from Minsk in July 1998, but the IMF staff and the Belarusian authorities continue to talk.

At the CIS summit in Yalta in September 2003, the Presidents of Russia, Kazakhstan, Belarus and Ukraine agreed to the establishment of a Single Economic Space which envisages the free movement of goods, services, capital and people between the 4 countries. Like many other CIS agreements, however, the practical significance of this document remains far from clear.