Working Papers

Kateryna Bornukova| 11.02.2014

Belarusian Economic Growth Decomposition

Belarus experienced rapid economic growth in the 2000's, which abruptly came to halt after 2008. The authors found that the major source of growth was capital accumulation, while growth in total factor productivity (TFP) was modest. Moreover, government interventions and controls on the capital market contributed to misallocation which lowered aggregate productivity. Lack of productivity growth led to the loss of competitiveness on the international markets. Comparisons of TFP in Belarus with the Czech Republic and Sweden shows that comparative advantages of Belarus are concentrated in the natural-resource based industries, and TFP gap with the Czech Republic is not closing over time.

Authors' central finding is that capital accumulation was the main source of growth in 2006-2010 in Belarus. In this regard Belarus follows the pattern of growth in the post-war USSR (Ofer, 1987). While many transitional and developing countries experience productivity growth in manufacturing, in Belarus manufacturing TFP was roughly stagnant. The authors also found that directed lending programs, initially designed to promote growth, cause capital misallocation and diminish aggregate TFP.