Macroeconomic Dynamics of Belarus in 2014: Currency Stress in the Background of Stagnation

Weak potential growth has sustained as the key challenge for Belarusian economy. In 2014, there has not been any substantial progress in this field, although the government declared a start in a preparatory stage for structural reforms. In current macroeconomic policy, the regime of exchange rate targeting has been preserved as the core element. Alongside, monetary and fiscal policies have become more tight and conservative in 2014. For the first time, the government has to retain the growth of real incomes. Furthermore, capital investment has been ‘repressed’ with a view to enhance financial stability. However, this policy design, even empowered by substantial injections from international reserves, could not resist new adverse external shocks. Hence, Belarus again faced currency and financial stress. This background determined charmless macroeconomic results of the year: low growth, high inflation and external imbalances. The combination of accrued structural and short-term problems vitalizes the challenge of long-lasting recession/stagnation in future periods.