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Presentation of the Belarus Economy Monitor, November, 2024. Summary
Economic activity in Belarus remained at a record high in Q3-2024, but output dynamics slowed down. GDP grew by ≈3.6% in Q3-2024 compared to Q3-2023. High consumer demand continued to be the main factor supporting GDP. Producers continued to adjust to high demand through moderate increases in investments. As a result, the Belarusian economy remained overheated, but the peak of expansion may have passed.
Inflation slowed to 4.9% QoQ in Q3-2024 (annualized growth rate to the previous quarter with seasonal adjustment). Price controls and the government's conservative approach to raising regulated prices have limited the pass-through of increased costs to consumer prices.
The authorities’ policies assumed no significant imbalances in the economy. Fiscal policy remained soft and will be stimulative in 2025, albeit to a lesser extent. Monetary conditions became neutral in Q3-2024, but it is unlikely that they will be given the required moderate tightness due to the institutional weakness of the National Bank. Interest rates on the credit and deposit market will be maintained near neutral levels in 2025. Domestic economic policy will slow the return of the economy to a balanced state.
The Belarusian economy is expected to “cool down” gradually over the medium term, barring major shocks in the Russian or global economy. Due to inertia, the cumulative GDP growth for 2024 is projected to remain high at around 4.3%. In 2025, economic activity is expected to stay elevated under moderately soft economic policies and government plans to significantly increase investments. However, growth momentum will weaken due to several constraints: an anticipated decline in demand growth in Russia, labor shortages, and the already high utilization of production capacity. GDP growth is expected to slow to 1.5–2.5% in 2025. Inflation is forecasted to accelerate from 5.5–6.0% YoY in 2024 to 6–8% YoY in 2025.
The combination of economic overheating, price controls, and the National Bank’s subordinated position to the government makes the economy more vulnerable to major shocks.