Belarus Country Risk Report Q4 2018
Economic growth in Belarus will peak in 2018, supported by robust fixed investment and the ongoing recovery across key trading partners. Beyond this, economic activity will gradually slow as it is capped by an over-reliance on Russia.
Fixed investment in Belarus in the months ahead will continue to pick up, largely in line with rising energy prices.
The ongoing recovery in Russia will continue to provide a boost to Belarus's economy over the coming quarters, as a result of the latter's economic dependence on the former.
Belarus's reliance on the Russian economy is a double-edged sword, as an expected growth slowdown in Russia in 2019 will weigh on Belarus's outlook.
The latest government cabinet reshuffle carried out by Belarusian President Alexander Lukashenko in August 2018 will lead to some minor economic reforms and liberalisation, although these will only proceed slowly. Improving relations with the West will continue to be hindered by Russia's assertiveness in keeping Belarus within its sphere of influence.
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.
The risk of a traded-conflict emerging between Russia and Belarus – although not our core view at present – has risen in recent weeks, posing a downside risk to our growth forecasts over the coming years.
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