Country Economic Forecasts > Belarus

The pace of annual GDP decline worsened to 4.5% in Q2 from 2.1% in Q1. Although the economy ministry has promised a range of output-raising measures, turnaround from the H1 decline will be slow; industrial output was down 7.1% on the year in January-September. We now expect a 3.2% GDP decline for the full year, much worse than the official projection of 0.2-0.7% growth and reversing the expansion of the last two years. And with the Russian economy now seen contracting again next year, we forecast a further 1% GDP decline for Belarus in 2016, before a slow return to growth of about 3% by 2018, with inflation expected to be 15% both this year and next due to BYR depreciation following the Russian ruble.President Lukashenko secured another five-year term in last month's elections despite the economic downturn, perhaps enabling sustained monetary and fiscal restraint and gradual rebalancing of the budget and current account deficits. But Lukashenko will be wary of making unpopular spending cuts or social reforms ahead of parliamentary elections in Q3 2016, and conditions for private business growth will remain challenging.