Belarus Economy: GDP Growth, Inflation, Labor Shortages | August 2024
Belarus’ economy saw significant GDP growth in Q2 2024, accelerating to 5.5% year-on-year, compared to 4.3% in the previous quarter. Economic overheating has increased amidst persistent labor shortages, with unemployment at a historic low of 3.0%. Investment growth, high consumer demand, and the strong performance of the Russian economy have driven this acceleration.
Key Highlights:
- Belarus GDP Growth: 5.5% in Q2 2024, up from 4.3% in Q1 2024.
- Labor Market Tightness: Unemployment is at a record low of 3.0%, creating wage pressures.
- Economic Overheating: Consumer demand remains overheated, with demand exceeding supply.
- External Trade Challenges: Trade balance deteriorates amid sanctions and falling export prices.
- Belarusian Ruble: Slight depreciation due to moderate pressures on the internal currency market.
Labor Shortages and Wage Increases in Belarus
The labor shortage in Belarus has driven businesses to increase wages by over 22% compared to 2021 levels. This wage inflation is a direct result of a tight labor market, with fewer unemployed individuals per vacancy. The wage growth is adjusted for inflation and continues to pose challenges for employers.
Consumer Confidence and Inflation Trends
The Consumer Confidence Index in Belarus rose to -1.4% in July 2024, marking the highest level since December 2021. Inflationary pressures remain a key concern, with annualized inflation reaching 6.1% in Q2 2024. Consumer prices are being held in check by price controls, particularly in the non-food sector, though price increases in services remain significant due to pro-inflationary factors.
Belarus Economic Forecast for 2024-2025: Slower Growth Expected
Looking forward, the economic outlook for Belarus in 2024-2025 suggests a slowdown in GDP growth. For the full year 2024, GDP is expected to grow by approximately 4%. However, in 2025, the pace of growth is forecasted to slow to between 0.5% and 1.5%, as higher interest rates temper credit expansion and demand.
Inflation in Belarus is projected to remain elevated, with consumer prices expected to rise between 5% and 7% in 2024. By 2025, inflation could accelerate further, potentially reaching 6% to 9%, influenced by rising prices in Russia and sanction pressures.
Economic Risks and Challenges Facing Belarus
Several risks could impact Belarus’ economic growth and inflation in the medium term:
- Sanctions and External Trade: Ongoing sanctions are disrupting trade financing and supply chains.
- Labor Shortages: Continued shortages in the labor market could restrict production capacity.
- Russian Economic Slowdown: A deceleration in Russia’s economic growth could dampen demand for Belarusian exports.
Despite these challenges, increased investments and more efficient economic policies could mitigate some of the risks, potentially driving stronger-than-expected growth.
Additional Resources
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