Author: Aydin Maharramov
The BRB Bottomline: The current protests in Belarus will likely cause further instability to Belarus’s already stagnant economy. However, depending on the political outcome of current events, Belarus could have an opportunity to transform its economy into one that is flourishing, efficient, and independent.
Weeks after the August 9th presidential elections in Belarus, nationwide protests have overtaken the country. The workers are on strike, demanding the resignation of the country’s six-term president, Lukashenko. At the same time, the EU and the US are considering new sanctions against Belarus. How will the current crisis affect the country’s economy, and what could a new economy look like?
The imminent short term effects of current protests on the economy will likely be damaging. Belarus’s heavy industry accounts for a quarter of its GDP, with oil refinement, chemical products, metallurgy, machinery and equipment constituting a majority of it. A decline in industrial production is a serious blow to the economy, which, like the rest of the world, has already suffered from the COVID-19 pandemic. Further, if new sanctions are imposed by the EU and the US, we can expect to see decreases in GDP growth and general economic instability.
However, these setbacks can be seen as a short-term financial sacrifice for a better economy in the long run.
The protests were caused by the economic stagnation and lack of foreign investment that Belarus has been experiencing for a long time. It’s 2019 GDP per capita was just $6,604, one of the lowest in Europe and around half of that of neighbouring countries like Russia and Poland. Its foreign direct investment, also one of the lowest in Europe, stood at around $1.3 billion. 300 CEOs in Belarus’s new and promising IT sector threatened to move their companies out of the country following the election.
Lukashenko’s presidency has been marred by economic failings. In an attempt to avoid some of the setbacks of new post-Soviet states such as high unemployment, Lukashenko adopted a stringent system of ‘market-socialism’. This has led to some of the biggest enterprises in Belarus being state-subsidized and ineffective. He has overseen several currency crises, one in 2011 being caused by a mass printing of money in order to raise the average wage. Additionally, the country’s outdated economy has depended on cheap energy supplies from Russia. Leading opposition leader, Sviatlana Tsikhanouskaya, has promised to end the current union treaty with Russia in an attempt to get rid of this close economic dependence with the Kremlin. The country, therefore, has an opportunity to improve its economy for the better, if Lukashenko leaves office.
A Brighter Future
The highly-regulated Belarusian economy needs immediate liberalization and privatization as well as the gradual building of industries free of dependence on cheap Russian oil. Privatization or elimination of inefficient and mismanaged state-owned enterprises companies will allow for a reduction of huge public debts‒which they have been responsible for increasing. However, in order to minimize the effects of unemployment, new leadership must implement comprehensive safety nets. Support for growth and competition in new private sectors such as IT will also be paramount in this restructuring. Ideally, the sectors that are least dependent on Russian imports would be given more opportunity to develop.
Depending on how current events unfold, Belarus might be looking at the prospect of transitioning to a new, well-functioning economy.