ECONOMY
As part
of the former Soviet Union, Belarus had a relatively well-developed
industrial base; it retained this industrial base following the
breakup of the U.S.S.R. The country also has a broad agricultural
base and a high education level. Among the former republics of
the Soviet Union, it had one of the highest standards of living.
But Belarusians now face the difficult challenge of moving from
a state-run economy with high priority on military production
and heavy industry to a civilian, free-market system.
After an initial outburst of capitalist reform from 1991-94, including privatization of state enterprises, creation of institutions of private property, and development of entrepreneurship, Belarus under Lukashenko has greatly slowed, and in many cases reversed, its pace of privatization and other market reforms, emphasizing the need for a "socially oriented market economy." About 80% of all industry remains in state hands, and foreign investment has been hindered by a climate hostile to business. The banks, which had been privatized after independence, were renationalized under Lukashenko. The government has also renationalized companies using the "Golden Share" mechanism--which allows government control in all companies with foreign investment--and through other administrative means.
Economic output, which declined for several years, revived in the late 1990s and early 2000s, but the economy has been dependent on heavy discounts in oil and natural gas prices from Russia. Belarus has historically re-exported the oil and oil products at world market prices, using the windfall profits to subsidize state enterprises. In December 2006, Belarus and Russian gas giant Gazprom signed a deal which will eventually end Russia's subsidies of gas for Belarus. Under the deal, Gazprom raised prices for Belarus gas deliveries in 2007 to $100 per 1,000 cubic meters--a significant rise from the subsidized previous price of $46, but still far less than the price paid by EU member states. The price for Russian gas will continue to increase incrementally until it equals the price paid by EU members in 2011. Additionally, Gazprom will gradually acquire a 50% stake in Beltransgaz, the Belarusian gas pipeline firm. In January 2007, Russia followed up with a steep duty on oil deliveries, which caused a significant drop in revenue from exports of oil products and Russian-sourced crude oil. The increase in gas prices and simultaneous moves by Moscow to reduce the profitability of refining Russian oil in Belarus for re-export disrupted plans to upgrade industries ranging from oil refining to cement production.
Peat, the country's most valuable mineral resource, is used for fuel and fertilizer and in the chemical industry. Belarus also has deposits of clay, sand, chalk, dolomite, phosphorite, and rock and potassium salt. Forests cover about a third of the land, and lumbering is an important occupation. Potatoes, flax, hemp, sugar beets, rye, oats, and wheat are the chief agricultural products. Dairy and beef cattle, pigs, and chickens are raised. Belarus has only small reserves of petroleum and natural gas and imports most of its oil and gas from Russia. The main branches of industry produce tractors and trucks, earthmovers for use in construction and mining, metal-cutting machine tools, agricultural equipment, motorcycles, chemicals, fertilizer, textiles, and consumer goods. The chief trading partners are Russia, Germany, Ukraine, and Poland.
The massive April 26, 1986 nuclear accident at the Chernobyl power plant, across the border in Ukraine, had a devastating effect on Belarus; as a result of the radiation release, agriculture in a large part of the country was destroyed, and many villages were abandoned. Resettlement and medical costs were substantial and long-term. Many living in Chernobyl afflicted zones have infrequent access to medical treatment due to remoteness, inadequate equipment, and substantial costs. Although the Belarusian Government claims otherwise, many radiation monitoring stations, especially in rural areas, are either ill-equipped, poorly staffed, and/or no longer in operation. Resettlement of those in affected areas remains incomplete.
Due to the economic and political climate, little new foreign investment has occurred in recent years. In 2002, two major companies, the Swedish furniture firm Ikea and Russian beer producer Baltika, ended operations in Belarus due to unrealized government commitments or unwelcome interference. Ford Motors did the same in 1999. Economic pressures in 2007 may have led to the unexpected and non-transparent sale of a state telecommunications company to an Austrian firm.
Growth in 2007 continued to be robust. Consumer price inflation averaged about 8.3% in 2007, but higher energy import prices are expected to drive up inflation in 2008 and subsequent years. Large wage increases, which were typical in the 1990s and early 2000s, fueled some increased consumption but also made Belarusian firms less competitive. Close to 20% of enterprises and a majority of collective farms currently operate at a loss, a level that has persisted since 2002. The government made progress in reining in its fiscal policies, largely due to constraints imposed by financial difficulties caused by the earlier economic slowdown. Belarus continues to be heavily dependent on Russia, with the potential for greater economic dependency in a long-proposed EU-style union between the two states. Prospects for an eventual union state remain weak, however, largely due to the apparent lack of interest on the part of the leadership of both countries. However, Russia, Belarus, and Kazakhstan have announced plans to move ahead with the formation of a customs union in 2008.
The World Bank announced a new 4-year country assistance strategy for Belarus in December 2007, focusing on global environment and energy challenges, enhancing the competitiveness of its economy to assure rising incomes, and protecting the welfare of the most vulnerable. As part of the strategy the World Bank is financing improvements to schools, hospitals, and homes for orphans, the elderly, and the disabled throughout Belarus, with particular emphasis on improving the energy efficiency of those facilities. In 2004, Belarus rejected a World Bank loan to help fight AIDS and tuberculosis. International Monetary Fund (IMF) cooperation is currently limited to policy and technical consultations.
Environmental
Issues
Belarus has established ministries of energy, forestry, land reclamation, and water resources and state committees to deal with ecology and safety procedures in the nuclear power industry. The most serious environmental issue in Belarus results from the accident in 1986 at the Chernobyl nuclear power plant. About 70% of the nuclear fallout from the plant landed on Belarusian territory, and about 20% of the land remains contaminated. But government restrictions on residence and use of contaminated land are not strictly enforced, and the government announced plans in 2004 to increase agricultural production in the contaminated regions. The government receives U.S. assistance in its efforts to deal with the consequences of the radiation. Belarus also faces growing air, land, and water pollution levels from potash mining in the south of the country.
GDP (2006): $36.9 billion.
GDP growth rate (2006): 9.9%.
Per capita GDP (2006): $3,800.
Natural resources: Forest land, peat deposits, potash, small amounts of oil and natural gas.
Agriculture: Products--grain, potatoes, vegetables, flax, beef, milk.
Industry: Types--machinery and transport equipment, chemical products, fabrics, and consumer goods.
Trade (2006): Exports--$19.838 billion (refined petroleum, potash fertilizers, machinery and transport equipment, chemicals, foodstuffs, metals, and textiles). Major markets--Russia, Germany, Netherlands, Poland, Great Britain, Ukraine, and Lithuania. Imports--$22.237 billion (mineral products, machinery and equipment, metals, crude oil and natural gas, chemicals, foodstuffs). Major suppliers--Russia, Germany, Ukraine, Poland, Italy, Lithuania.
Exchange rate (January 2008): 2,150 BYR (Belarusian rubles)=U.S. $1.
