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The Republic of Belarus. Macroeconomic Presentation.

The Republic of Belarus. Macroeconomic Presentation. November 2011. Stably High Paces of Economic Growth . Real GDP growth (%). During the last decade the Belarusian economy demonstrated stably high paces of economic development, with GDP more than doubled in this period ….

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The Republic of Belarus. Macroeconomic Presentation.

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  1. The Republic of Belarus. Macroeconomic Presentation. November 2011

  2. Stably High Paces of Economic Growth Real GDP growth (%) During the last decade the Belarusian economy demonstrated stably high paces of economic development, with GDP more than doubled in this period … GDP per capita (000s) …andalmost3-fold growth of GDPper capita in US dollarsterms (PPP-method) GDP growth in 2010-2011 (%) Source: Ministry of Economy

  3. Foreign Trade Openness of economy Result of openness – external vulnerability. In January-September 2011 to every 1 US$ of GDPfit 0.8 US$of imports and 0.75 US$ of exports. This reflects the dependence of republic from changes on external markets.The growth of prices on mineral resources lead to the widening of negative trade balance.Slowdown in the growth of the world economy reduce the export possibilities. Structure of import (US$ billions) The share of minerals in imports during the last 5 years increased to 45 % in January-September 2011. Import of oil and oil-products constitutes 27% of imports, gas – 11%.

  4. Gross External Debt Short-term and Long-term external debt (US$ millions) In spite of the rather high growth rates of external debt (16.5% in the first half of 2011)its level let to meet liabilities to external creditors in full and in time. During the last 2½years long-term liabilities increased by 2.7 times, while short-termliabilities – only by 1.7 times, which led to the increase of share of long-term debt to 56.9% in the total amount Structure of external debt by sectors (US$ millions) Excluding the share of trade credits and intercompany borrowings the gross external debt would stood at 41 % of GDP

  5. Inflation Acceleration and Labour Market CPI inflation (%) • Main factors of inflation acceleration in 2011: • imported inflation (increased prices on mineral resources, conjuncture of external prices, etc.) • changes of the structure of costs as a result of growth of the imported component. Growth of the real incomes of population (%) Registered unemployment rate (%)

  6. FDI and Investment Climate FDI inflow (US$ millions) Rebalancing of investment for strengthening the potential of long-term economic growth by increasing the FDI inflow. Small and medium-sized enterprises in the medium-term perspective will become the main driver of economic growth. Directive №4 is aimed at considerable reduction of state influence on economy, development of the private sector which made Belarus more attractive for foreign investors. According to annual Doing Business report, assessing the countries by investment climate, the Belarus take 69th place out of 183 countries comprehended by research, improving its position by 22 place comparing with the previous research. The aim – to enter top-30 before 2015. Share of Small and Medium-sized Enterprises in GDP

  7. Privatization Privatization receipts to the republican budget (US$ millions) The Government has formed the list out of 245 enterprises, privatization of which is planned in 2011.The Government considers possibility of additional sales of shares and other assets, which belongs to Belarus. In November 2011 was signed the agreement on sale of 50 % stake in Beltransgas to Gazprom for US$ 2.5 billion. Important instrument of further privatization – National Agency of Investment and Privatization, created in the partnership with the World Bank.

  8. Exchange Rate and Interest Rates • Exchange rate flexibility: • transition to regime of managed float:- National bank do not take obligations on maintaining exchange rate in the set band;- currency interventions are making only to level-off short-term exchange rate fluctuations • stabilization and increase of international reserves: from April to November this year FX reserves grew by US$ 0.9 billion International Reserves in 2011 (US$ millions) Source: National Bank Refinance rateand interest rates on credits and deposits in the Belarusianruble (%) • Monetary policy tightening in 2011: • limitation of credit emission: from June 1, 2011 to November 1, 2011the net internal ruble claims of the National banks increased by only 2.4 %; • interest rate hikes: - refinance rate increased from 10.5% to 40%; - interest rate for the instruments of liquidity support – from 16% to 65% • increase of norm of mandatory reservesby 1.5 percentage point (excluding for funds in national currency, attracted from individuals). 2010 2011 Source: National Bank

  9. Macroeconomic Adjustment of External Imbalances is Underway • Adjustment of external imbalances: • export reached the record levels (12.3 US$ billions in Q3) • import growth rates was considerably lower comparing with export(growth in Q3 2011 by 39.5 pp to Q3 2010) • positive balance of external trade(вin Q3 2011 – 0.6 US$ billion) • stable level of current account deficit(in Q3 2011 – 2.6%of GDP) Foreign trade (US$ millions) Term Deposits of Individuals in 2011 (billion rubles) Source: National Bank • Adjustment of internal imbalances: • reorientation of economy from domestic to external demand (in September 2011 export grew by 34.2% comparing with September 2010, while retail turnover contracted by 3.8% and investment – by 8.4% • inflow of term ruble deposits of individuals in banks(from15 June to 1 November their increased by 27.8%) Source: National Bank

  10. Banking Sector Main characteristics of the banking sector: Number of banks – 31, including 26 – with foreign participation Assets – $29.7 billion Bank’s claims to the economy – $18.8 billion Funds of the population in the banks – $5.5 billion Capital– $2.5 billion ROA (before taxation) – 2.0% Assets and credits (average annual, % of ВВП) Source: National Bank FDI into the banking sector (US$ millions) As of November 1, 2011 the foreign participation share in the capital of banking sector was 29.1% Major foreign investors into the banking sector: Source: National bank

  11. Capital Adequacy and Problematic Assets Capital Adequacy Ratio(%) As of November 1, 2011 capital adequacy ratio was 14.3% (national norm – no less than 8 % ) As of November 1, 2011 the norm of capital adequacy was observed by all banks Source: National Bank Share of problematic assets in the assets exposed to credit risk (%) • As of November 1, 2011 the share of problematic assets was 4.3 % • The share of problematic assets in the assets exposed to credit risk remains lower comparing with some other countries in the region Source: National Bank

  12. Public Sector Budget Forecast for public sector budget in 2011: - revenues $18.6 billion (38.1% of GDP) • - expenditures $18.1billion (37.1% of GDP) • - budget surplus $0.5 billion (1.0% GDP) while initially planned deficit was 2.9% of GDP • Stable reduction of tax burden: by 6.7% of GDP in last 5 years (to 27.3% of GDP in 2010) • Stability of FSPP. In the first 9 months of 2011 surplus of FSPP was$0.25 billion Expenditures (%) Revenues (%) Source: Ministry of Finance 2011 Structure of expenditures (%) Structure of revenues (%) Source: Ministry of Finance 2011 Source: Ministry of Finance 2011

  13. Fiscal Policy Measures in 2012 Notwithstanding the plans on reduction of tax burden, the Government expects the surplus of budget of public sector in 2012 in the amount of 0.1% of GDP. • Revenue-enhancing measures: • increase of tax base because of inflation and devaluation; • increase of excises on alcohol and tabacco; • increase of tax rate on extraction of potash by its linkage to the cost of potash fertilizers on the international markets; • indexation of tax rates fixed in Belarusian ruble on inflation rate • Expenditure-cutting measures: • tight economy of current expenditures of budget organizations; • limitation of public capital expenditures; • maximal limitation of import purchases; • avoidance of increase of real wages; • reduction of subsidies to the real sector of economy; • increase of recovery rate for the utilities and transport services

  14. Tight Fiscal Policy in Medium Term Starting from 2011 tight fiscal policy has been conducted:in January-September 2011 the surplus of budget of public sectorreached 2.9% GDP Balance of public sectorbudget (% GDP) Fiscal consolidation Source: Ministry of Finance Despite the abrupt reduction of budget deficit the Government is taking steps on cutting back the tax burden.It is expected that in 2011 the tax burden will decreased to 24.7% of GDP (excluding FSPP)

  15. Public debt remains at manageable level Public debt (% GDP) • As ofOctober 1, 2011 • Public debt - $12.2bn (29.5 % GDP) • Legislative limit - 45% GDP • - external debt- $11.3 bn (27.4% GDP) • domesticdebt - $0.9 bn (2.1% GDP) • contingent liabilities (guarantees) was$2.7 bn (6.6 % GDP) • - debt of local authorities – $5.1 bn (12.4% GDP), out of whichguarantees - $3.9 bn (9.4% GDP) Source: Ministry of Finance External public debt (billion US dollars) Domestic public debt (billion US dollars) Source: Ministry of Finance Source: Ministry of Finance

  16. Low Refinancing Risk for External Public Debt Currency structure of external public debt (%) • As of October 1,2011 • - external debt - $11.3 bn (27.5 % GDP): • - average maturity – 5.8 year • - average interest rate –4.1% • share of debt to be repaid in 12 next months –3,7% Источники внешнего госдолга (%) Source: Ministry of Finance, as of October 1,2011 Russia– 26,6 Eurobonds – 15,9 • During the first 9 monthsof 2011 external public debt has grown by$1.8 bnor 19.2% • Main borrowings in 2011: • Eurobond issue -$0.8 bn (January); • 1sttranche of Anticrises Fund of EurAsEC – $0.8 billion IMF – 31,5 China – 9,8 Source: Ministry of Finance, as of October 1, 2011

  17. Payments On External Public Debt Payments on public external debt (US$ billions) • In January-September 2011 the Government meet its external liabilities in the amount of $455 million., including: • coupon payments on Eurobonds • payments on export credits • planned payments under the credits from IMF, Russia and other borrowings Source: Ministry of Finance Payments on public external debt (% of exports) Safety threshold – 10% of exports Source: Ministry of Finance, IMF

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