The economic growth of Belarus is closely linked to the state of affairs in Russia. Despite the fact that the country gained sovereignty after the collapse of the USSR, close cooperation between the economies of the two countries remains and there is a clear trend towards a negative impact on the stability of the situation in Belarus by the weakening of the Russian ruble. This is not surprising, because for Belarus Russia is the main partner in the export of goods. Among the CIS countries, the inflation rate in Belarus has long been one of the highest.
Macroeconomic factors affecting inflation
Many people know firsthand that prices in Belarus are constantly growing, and for the inhabitants of the country this fact has long been an axiom. It is difficult to say that any one reason leads to frequent price increases. The rise in prices in this country, as, indeed, in any other, is affected by a combination ofmacro- and microeconomic factors. Macroeconomic, or external, factors are those aspects that affect the country's economy from the outside and which depend not only on the country's policy. Among them are:
- the economic situation in the world (the situation in the world as a whole, of course, affects the economies of countries, for example, the 2008 crisis that began in the United States had a significant impact on the markets of Russia and subsequently Belarus, exports fell, production rates slowed down, which led to the collapse of the ruble in 2011 in Belarus and inflation of more than 100%);
- the volume of investments (the growth of industrial production, the volume of services provided depends on the attractiveness of the country for investing foreign capital. If investments come, GDP grows, favorable conditions are created for increasing capital, for raising wages, at which the inflation rate does not exceed acceptable values);
- the volume of exports and imports (if a country exports less goods than it imports, this creates a budget deficit and is reflected in the inflation rate. Belarus is a young country that is actively looking for new partners and developing its production potential);
- stability of the national currency exchange rate (dependence on other currencies, in particular for Belarus on the stability of the Russian ruble, and peg to the dollar, the national currency of the country has repeatedly undergone devaluation with all the unpleasant ensuing consequences: rising prices, a decrease in real wages in dollar equivalent, the inability to freely purchase currency).
Internal or microeconomic factors
Among microeconomic factors (internal aspects that affect price growth and inflation) are the following:
- monetary policy pursued by the government (the state has leverage to influence price changes, artificially restraining them for certain goods and products, for example, prices for socially important food products are set in Belarus: milk, bread, eggs, etc.);
- monopoly of the owners of large companies (using their right to be the only company on the market, they are free to set prices freely, for example, mobile operators);
- Issue of "empty" money, unsecured issue (for example, when the country's budget deficit, money is simply printed without commodity security, this situation often occurs in Belarus);
- the country's internal and external debt (loans received from other states and international organizations, as well as internal loans from the population through the issuance of bonds, have a negative impact on inflation. Loans from the IMF and Russian assistance are the main sources of financing for the young Belarusian economy);
- decline in production volumes, shortage (as a result, the quantity of goods becomes less than the amount of money: the situation was typical after the collapse of the USSR, when there was money, but there was nothing in stores).
The totality of all these parameters is reflected in the level of inflation in the Republic of Belarus. Since the country has problems with almost all of these factors, growthinflation persisted for a long time.
Changes in the inflation rate in Belarus from the 90s to 2017
After the collapse of the Soviet Union, Belarus, like other countries, experienced a difficult stage of decline in production. In fact, it was a new independent country with a practically collapsed industry and economy. Due to the devastation and decentralization of power, there was a shortage of goods, while the amount of money in free circulation grew. All this led to hyperinflation. So, in 1993 it was 1990%. We can say that money depreciated by leaps and bounds.
The new authorities tried to stabilize the situation, mastering the government of the country through trial and error. Already in 1995, it was possible to reach an inflation rate of 245%. This was a great success for the National Bank and the government. Subsequently, inflation in Belarus continued to decline. At the end of the first decade of the 21st century, it was 9.9%. Then, in 2011, the crisis broke out, and the country's leadership was forced to take unpopular measures and devalue the country's currency. In just a couple of months, the dollar has doubled. Real wages in dollar terms fell, banks were given instructions to limit the sale of foreign currency. At the end of the year, inflation was 108%.
Expectations in 2018
Currently, a rather tight monetary policy is being pursued in Belarus, but it is very effective. 2017 pleased with a very low inflation rate in Belarus and amounted to only 4.6%. This figure is an absolute record in the entire history of Belarus. At the same time, price growth has significantly decreased, the country has ceased to be the first in this indicator among the CIS countries.
In the current 2018, the positive trend of slowing down price growth continues to persist. The price and monetary policy that restrains inflation has been established in the country. According to experts' forecasts, inflation in Belarus should not exceed 5% by the end of the year. Whether the country, the National Bank and the government will be able to cope with this task, it will be possible to say only at the beginning of 2019, when the statistical data will be processed and made public.
