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Belarus` crisis may worsen, EBRD warns

Belarus’ economic crisis may worsen, the European Bank for Reconstruction and Development (EBRD) said in its latest Regional Economic Prospects report issued this week.

“Belarus is undergoing a severe balance of payments crisis, triggered by large direct lending, rapid growth of public sector wages and pensions, and loose monetary policy,” the report said. “Instead of allowing a rebalancing of domestic and external demand after the May devaluation, the authorities have resorted to administrative measures in the currency and consumer markets. These steps are likely to further exacerbate the crisis. Most foreign exchange operations now take place in unofficial markets at parallel exchange rates.”

The report said that Belarus witnessed "the most dramatic increase in inflation, to 44 percent in June year-on-year," which was a reflection of its balance-of-payments crisis and the significant devaluation of the national currency in May. However, the report said, inflation in May 2011 was higher in almost all transition countries compared with a year earlier.

The EBRD has revised upward its Belarusian GDP growth forecast from three percent, seen in May, to five percent for 2011 and lowered it from 3.5 percent to three percent for 2012.

According to the report, the EBRD now expects Belarus’ inflation to increase by 35 percent this year, up from 14.7 percent that it projected in May.

Its forecasts for a number of Belarus` other macroeconomic indicators have remained unchanged. The EBRD still projects the country’s current account deficit at 15.7 percent of GDP (compared with 15.5 percent projected in 2010), its fiscal deficit at 1.7 percent of GDP (1.8 percent) and net foreign direct investments at three percent of GDP (2.3 percent). //BelaPAN