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.
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.
Learn how to effectively navigate the market research process to help guide your organization on the journey to success.Download eBook