Belarus is a small diversified economy, with a low poverty rate (4.8%), a GDP per capita of USD 6681 in 2019 and a skilled population. However, its economic growth is low and volatile as the economy is vulnerable to the external environment and highly reliant on Russia for trade and external financing support. Russia is its largest creditor, largest investor and main trade partner.
The economy is expected to contract in 2020 with the coronavirus outbreak (vs + 1.2% in 2019) and medium-term prospects remain low due to important structural weaknesses. Potential growth is estimated at only 2%. The government has a pervasive impact on the economy as it subsidizes weak and inefficient state-owned companies. Meanwhile, its fiscal support to sustain economic growth is limited and is expected to deteriorate further as Russia has projected to progressively withdraw its implicit oil-subsidies over the period 2019-24. Finally, the aging population and weak population growth weigh on potential growth.
Although fiscal metrics seem satisfactory (public debt was contained below 46% of GDP in 2019), the structure of public debt is risky as it is almost fully denominated in foreign currency while FX reserves remain inadequate in relation to foreign-exchange debt repayments and imports.
