Lukashenka sends signals to West as he realizes Belarusian economy is failing

14/08/2022 - 01:37
Instead of making real changes to trade with the West, Lukashenka would rather emphasize the danger from Russia / AP

The Belarusian authorities have become less optimistic in assessing the economic situation. Lukashenka recently called the situation "very serious" and said it was imperative to trade with the EU. Before that, the head of the National Bank Pavel Kalaur said that banks could no longer cover problem loans of enterprises.

What happened? Euroradio asked the economists.

Debts of enterprises will affect people - banks have too many of them

National Bank / Euroradio

It's impossible to say what exactly is going on in the economy and whether there is any drastic change that affected the rhetoric of the authorities. After all, the authorities are keeping the statistics a secret. 

"Most likely, this is happening out of bare necessities of life," says Leu Lvouski, senior researcher at BEROC. "But the GDP is falling pretty hard: about 9% in May. Given our economic growth of one percent a year for the last ten years, that means we are rolling back nine years".

Moreover, the issues are found in all spheres and did not appear yesterday. Why then are Lukashenka and the National Bank feeling the heat now?

"Businesses cannot pay their debts. And commercial banks were forced to write off junk assets into their accounts. Pavel Kalaur said they have reached the limit and can no longer milk the banks".

Apparently, funds for directed loans will be taken from the emission. And we have already seen emission changes over the past few months. A lot of money is going through the Development Bank, which has been allowed to issue bonds. They will, in all likelihood, be bought by the government.

In other words, the Belarusians will pay for it: they will contribute to the budget through inflation due to printing money.

"Lukashenka understands the problem, but he is not ready to do anything"

Lukashenka's meeting on the economy / BELTA

Lukashenka's gut told him that things are bad in the economy, but he was not prepared to do anything but admonish officials.

"In Lukashenka's model, he simply has to keep everyone on their toes. And certainly doesn't want to break away from the European market. The opportunities, the money, the technology are there," says economist Yaraslau Ramanchuk. "But he may say one thing in the first half of the day and another thing in the next." 

But Lukashenka can see that the West is serious. And he sends indirect signals to hold some negotiations on easing sanctions. He will use the argument "the Kremlin is a danger, the Kremlin is forcing me" so that some of his partners from the pre-2020 times would help him to neutralize the crisis.

Belarusians will rely on shopping tours and gray trade /

Despite Lukashenka's plans to finish the year as good as 2021, GDP will decrease by 7-10%, says Yaraslau Ramanchuk.

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