Belarus Country Risk Report Q1 2020

Belarus Country Risk Report Q1 2020

We have reduced our 2019 and 2020 real GDP growth forecasts for as a change in Russian tax regulations on crude sales is having a marked impact on economic activity. Exports and government spending will be most directly affected, although we also think that private consumption will slow over the course of 2020. There are upside risks to our growth forecasts stemming from the possibility that Russia rolls back its tax change or introduces some sort of subsidy program to replace it.

We at Fitch Solutions believe that tensions between Russia and Belarus will remain elevated over the coming quarters despite signs that the two are making progress at resolving a dispute over oil subsidies. The two countries are in the process of a negotiating an integration pact that would significantly increase their economic and political links. However, we believe that this pact is unlikely to actually be implemented and is instead being used by the Belarusians to increase leverage in negotiations with Russia over oil subsidies. The pact is also a way for Minsk to buy time to improve the competitiveness of its oil refineries so that they can be viable even without Russian subsidies.

Key Risks

Belarus will make scant progress in reducing the size of the country's external debt pile in the years ahead. As a result, Belarus will need to secure external financ-ing to meet foreign currency debt obligations, which will expose the country to significant financing risks.

Failure to secure external financing could trigger a vicious cycle of increased default risk and slowing growth.

Belarus will remain dependent on continued good relations with Russia and high yield eurobond issuance, the latter being sensitive to global demand conditions.

Russia's oil tax 'manoeuvre' represents a persistent risk to investment.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Belarus Real GDP Growth To Continue Slowing From Russian Tax Change
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: TOP FIVE IMPORTS IN 2018
TABLE: TOP FIVE EXPORTS IN 2018
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
10-Year Forecast
The Belarusian Economy To 2028
Long-Term Growth Prospects Remain Subdued
TABLE: LONG-TERM MACROECONOMIC FORECASTS
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Belarus Country Risk Q1 2020ContentsPolitical Outlook
Domestic Politics
Belarus-Russia Ties To Remain Strained Despite Signs Of Rapprochement
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Lukashenko Succession And Relations With Russia Are Key Risks
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
TABLE: FREE TRADE AGREEMENTS
TABLE: FREE TRADE ZONES AND INCENTIVES
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISK
TABLE: WATER RISKS
Global Macro Outlook
Lower Growth, Despite Some Trade Progress
TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: BELARUS – MACROECONOMIC DATA AND FORECASTS

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