Economic Growth And Development Of Construction And Real Estate Sectors In Belarus

The economic growth in Belarus is to a great extent determined by the development of construction and real estate sectors. Under the conditions of declining business activity, construction is regarded as a driving force for the national economy. Sectorís share in GDP has increased from 9.3 % to 10.7 % in 2009. While in 2008 the residential area put to use constituted 5.14 mln. m2, in 2009 it reached an all-time high at 5.8 mln. m2 and according to the decisions from 2008, 10 mln. m2 of residential area has to be build in 2011. In 2009 only housing construction has absorbed 20,6 % of total national investments. Large-scale needs in investment and allocation of resources in construction on a priority basis will take place at the expense of other economic activities. So the risk of slowing of national economy diversification and increasing imbalance becomes higher. To keep economic growth in Belarus sustainable it is essential to improve construction industry relations with real estate markets. At present a ìpushing outî model is dominating when the volume and structure of additional housing is determined by industry plans. A transition to a ìpulling outî model, where the real estate market will play a proper role and supply will be guided by demand, will permit to diversify the risks and reduce alternative costs of residential investments. An econometric analysis of quarterly data indicates that salary dynamics does not directly affect the volume of housing construction in Belarus. At the same time there is a strong positive influence of the inflation dynamics on housing construction that indicates the inflationary character of construction funding. Negative influence of the salary dynamics on the construction output increase can be explained as follows: when there is a relatively great increase in the salary of employees of government-financed organizations, the volume of resources to be invested in construction decreases. The analysis has also revealed that the absolute volume of construction has a positive impact on GDP whereas dynamics indices have a negative one. The given results raise the issue of a serious reexamination of the construction and real estate sectors development in Belarus.