March 2021. Republic of Belarus: Social and economic development in 2020 and medium-term prospective

04 June 2021

Refraining from quarantine measures combined with support to the state-owned enterprises prevented a deep economic recession in the Republic of Belarus. In 2020, the country's GDP contracted by 0.9 percent compared to growth by 1.4% in 2019. Net export was the only factor contributed to economic growth. The reduction in the export of petroleum products and the growth of state support for enterprises became the main factors behind the budget deficit, which amounted to 1.6% of GDP against a surplus of 2.3% GDP previous year. At the same time the non-primary export volumes increase and their import volumes decrease contributed to almost balanced CAB against 2% GDP deficit in 2019. However, devaluation expectations rise and downturn in the world economic activity led to capital outflow and, as a result, reduction in gross international reserves. Monetary policy was focused on keeping trade-off between support of the economy and maintaining price and financial stability amid the negative impact of the COVID-19 pandemic. The banking sector remained resilient despite declining profitability caused by efforts to slowdown the deposits outflow from the system. According to the baseline scenario of the macroeconomic forecast economic growth in the medium term will remain weak (not higher than 1%) due to structural constraints of the existing economic model.