Belarus Country Report Jul18 - July , 2018

July 3, 2018

The Belarusian economy was recovering nicely in the first quarter of this year, thanks to the revival in neighbouring Russia and more benign external conditions in general.

Impressively Belarus' industrial output was up a healthy 8.8% in January-April at BYR35.2bn, the national statistics committee reported on May 16. And the inflation rate in Belarus eased to 4.4% in May of 2018 from 5% in the previous month. It was the lowest inflation since at least 1992, as prices advanced at a softer pace for food (2.9% from 4.2% in April) and services (10.1% from 10.3%). Contrarily, cost for non-food products expanded faster (2.7% from 2.5%).

And real disposable cash earnings are expected to grow by 3.4% year-on-year in 2019 that will drive consumption and give the economic recovery some legs.

The government is taking advantage of the mild weather to make sure it is not caught out by its external debt obligations. The state issued bonds last year and at the start of this, enough to cover all its refinancing needs through to 2019.

The state does not plan to issue any new debt -- maybe some Russian ruble bonds -- and will take any budget surpluses and use them to pay down debt. The Republic’s prudent attitude to its borrowing needs mean the Belarusian Eurobonds have been strong performers and attracted foreign investors interest. The republic development bank might be the exception with a possible Eurobond issue this year, however, any money it raises will be ploughed into commercially viable projects.

Another sign of progress is the EBRD is beefing up its involvement with the republic. The bank’s Vice President Pilloux said after meeting with Belarus President Alexander Lukashenko on 7 June: “As far as performance indicators of the Belarusian economy are concerned, they demonstrate an improvement in a number of areas. I am talking about indicators like economic growth and inflation, which are under control. Two years ago we dropped limitations on our operation in Belarus. It allowed us to considerably step up work on infrastructure projects in the country.”

And probably the most exciting development of the year will be Belarus joining the Clearstream international settlement system that will allow international traders direct access to the local Belarusian ruble bonds issued by the government, corporates and municipals, a step that has revolutionized other capital markets in the region.

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