The economic growth of Belarus is closely related to the situation 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 a tendency to negatively affect the stability of the situation in Belarus is 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 of macro- 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 policies. Among them are:
- 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 slowed, which led to a collapse the ruble in 2011 in Belarus and inflation of more than 100%);
- volume of investments (the growth of industrial production, the volume of services provided depend on the country's attractiveness for investing foreign capital. If investments come, GDP grows, favorable conditions are created for raising capital, for raising wages, at which the inflation rate does not exceed the permissible 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 seeking new partners and developing its production potential);
- the stability of the national currency (dependence on other currencies, in particular for Belarus, on the stability of the Russian ruble, and pegging to the dollar, the country's national currency has repeatedly undergone devaluation with all the unpleasant consequences: price increases, lower real wages in dollar terms, the impossibility of free purchase currency).
Internal, or microeconomic, factors
Among microeconomic factors (internal aspects affecting price growth and inflation), the following can be distinguished:
- monetary policy pursued by the government (the state has levers of influence on price changes, artificially restraining them for certain goods and products, for example, prices for socially significant food products are set in Belarus: milk, bread, eggs, etc.);
- the monopoly of the owners of large companies (using their right to the only company on the market, they are free to set prices in a free order, for example, mobile operators);
- issue of "empty" money, unsecured issue (for example, with a country's budget deficit, money is simply printed without commodity support, this situation often arises in Belarus);
- the country's debt internal and external (loans received from other states and international organizations, as well as internal loans from the population through the issuance of bonds, are negatively reflected in the inflation rate. IMF loans and Russian assistance are the main sources of financing for the young Belarusian economy);
- decline in production volumes, deficit (as a result, the quantity of goods becomes less than the volume of money: the situation was typical after the collapse of the USSR, when there was money and there was nothing in the stores).
The totality of all these parameters is reflected in the inflation rate in the Republic of Belarus. Since the country has problems with almost all of the above factors, inflation continued for a long time.
Change in inflation 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, a shortage of goods arose, while the amount of money in free circulation grew. All this led to hyperinflation. So, in 1993, it amounted to 1990%. We can say that money depreciated not by the day, but by the hour.
The new authorities tried to stabilize the situation, through trial and error, mastering the country's governance. Already in 1995, it was possible to reach the 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 amounted to 9.9%. Then, in 2011, a crisis struck, 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 amounted to 108%.
2018 expectations
Belarus is currently pursuing a fairly tight monetary policy, but it is very effective. 2017 pleased the 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 dropped significantly, the country ceased to be the first among CIS countries in this indicator.
In the current year of 2018, a positive trend of a slowdown in price growth continues to persist. The country has established inflation-pricing and monetary policies. According to experts, at the end of the year inflation in Belarus should not exceed 5%. Will the country, the National Bank and the government manage to cope with this task, it will be possible to speak only at the beginning of 2019, when statistics will be processed and published officially.