The FINANCIAL — The modest cyclical expansion of economic activity in 2017 has ended a two-year recession, but economic growth is expected to remain weak, says the World Bank Economic Update on Belarus.
Although modest growth will ease pressures on the balance of payments, large dependence on external financing leaves the economy vulnerable to macroeconomic shocks. On the positive side, the stronger than expected recovery of main trading partners, and expected benefits from recent business environment liberalization measures, bring upside potential for the economy.
“Macro-stabilization measures have contributed to the current recovery and prudent macroeconomic policies should continue”, said Mr. Alex Kremer, World Bank Country Manager for Belarus. “To improve living standards, Belarus should remain focused on improving the climate for entrepreneurship, with emphasis on implementation and enforcement of new regulations. It should also address biases towards unproductive state-owned enterprises in market competition, governance, procurement, and credit allocation. Faster increases in incomes require productivity improvements associated with a better allocation of resources”.
A Special Topic Note of the World Bank Economic Update on Productivity in Belarus analyzes the productivity dynamics of the economy and factors behind its trajectory.
“The weak external environment has revealed deep-seated structural structural limitations, including the misallocation of capital and labor, weakening the economy and incomes”, noted Kiryl Haiduk, World Bank Economist. “The end of Belarus’s growth boom started with the global financial crisis of 2008 and the gradual revision of the terms of energy trade with Russia. Falling total factor productivity and returns to capital reveal allocation inefficiencies that need to be addressed through organizational and technical transformation. This will generate productivity gains and economic growth”.
Since the Republic of Belarus joined the World Bank in 1992, lending commitments to the country have totaled US$1.7 billion. In addition, grant financing totaling US$30 million has been provided to various programs, including those with civil society organizations. The active investment lending portfolio financed by the World Bank includes nine operations totaling US$ 991 million.