New face of the economy

During the development of the Program of social and economic development up to 2015 within the framework of conception of « New face of the economy» the new characteristics of the economic activity of the Belarusian system were introduced. Some of them are «added value», «highly-efficient jobs», «labor efficiency on added value», «structural transformation». Socio-economic development was focused on qualitative indicators such as foreign direct investment on a net basis, reducing material and energy intensity, the ratio of export and output, new technology and modernization, and so on.

As a result of the activity of the Ministry of Economy a number of statutory and regulatory enactments on improvement of the business climate in the country has been adopted. As a result, Belarus every year improved its position «Doing Business» Report of the World Bank. Our country was recognized as one of the most active countries-reformers. From 2011 to 2015, the overall rating of Belarus has improved by 34 positions, the country ranked 57th place, ahead of the partners in the Eurasian Economic Community and the majority of the CIS countries.

However, at this stage the impact of negative external factors remained intact and resulted in extremely unfavorable market conditions for the development of the open belarusian economy. The first negative factor at the beginning of this period originated from the consequences of the global financial crisis.

The stimulation of domestic demand, as a measure to overcome the negative impact of the crisis, provoked the accumulation of imbalances in the economy, the growth of foreign trade deficit and an increase in gross external debt of the country.

Accumulated imbalances led to devaluation of currency, high inflation and decline in personal incomes in 2011. At the same time, the devaluation has spurred the growth of export sales. The volume of foreign trade in goods exceeded the pre-crisis level (in 2008 – 72 billion US dollars, in 2009 –  50 billion US dollars, in 2011 –  87 billion.). The change of the national currency exchange rate helped to return the trade deficit to safe area.

In 2012, emission-free development, focused on external market, combined with a flexible exchange rate and economically sound salaries, balanced the economy, increased the personal incomes of belarusians and ensured  a deficit-free budget.

However, in 2013 the decline in GDP in the EU and the slowdown of the dynamics in the economy of our main partner - the Russian Federation, significantly limited the ability of the economy of Belarus to grow at the expense of external demand. Another negative factor was «the potash crisis» in 2013, consisting in a sharp decline in potash prices. The consequence of all this was a decrease in exports and a slowdown of GDP. In these circumstances, the choice between growth and balance was clearly made in favor of the latter.

In 2014 the economy of Belarus faced new challenges and shocks, both at regional and global level. Crisis in the Russian economy, low investment activity of Russian companies, mutual sanctions regime between the EU and the Russia, the instability in Ukraine's economy – all these factors held the ability of the Belarusian economy to grow in the current period.

Another negative factor in the dynamics of the economy in 2013-2015, the decline in prices for oil and petroleum products. So if a barrel of Brent crude oil in March of 2012 costed more than 120 US dollars by the end of 2015, it traded at $ 40.

Considering these factors, the Belarusian economy could not take full advantage of the traditional external sources of growth. The economic growth through the internal market has been limited by the necessity to eliminate the imbalances of the period 2006-2010  and risks of devaluation-inflation. In addition, the country was forced to divert substantial resources to pay external debt. The sum of these factors led to restrained growth of the main macroeconomic indicators.

The average annual rate of GDP growth amounted to 1.1 percent, real incomes increased by 1.33 times. Despite all the difficulties, it was possible to achieve the inflation planned, which slowed down from 108.7 percent in 2011 to its lowest level - 12 percent. The growth of salaries was linked with an increase in productivity of labor: in 2015 the rate of growth of labor productivity exceeded the growth in real wages by 0.4 percentage points. However, amid low productivity growth in the 2014-2015   there was a slowdown in growth in salaries and personal incomes.

In order to overcome the negative impact of external factors, the Ministry of Economy has developed a new export strategy of market diversification «one third»-based approach. It means that in the medium term all the Belarusian export will be redistributed among the markets of the EAEC, the EU and the countries of «long-arc». Implementation of this strategy should minimize the impact of external economic conditions on the economy and reduce the high concentration of exports in certain markets.

In general, balanced economic policy, based on emission-free development, a flexible exchange rate, an economically reasonable salary increases, depending on productivity of labor, allowed to maintain macroeconomic and social stability, improve the quality of life of people.

According to the UNDP report on «Human Development Index 2015» which gives a comparative analysis of the 189 UN member states at the level of human development through the baseline indicators (decent standard of living, life expectancy, level of education) Belarus took the 44th place (with Russia) and got into the saddle of a group of countries with high human development, being one position lower than Montenegro, which tails the group of countries with a very high income.