Tag: Belarus Sanctions Impact

Dreaming of Entrepreneurship or Requiem for a Dream – What Kind of Future Do Parents Envision for Their Children in Belarus?

Posted on November 4, 2024 | Policy Brief

A person performing high-altitude cleaning on a roller coaster structure, symbolizing bravery and entrepreneurship spirit in Belarus, with future generations and children in mind.

Even under current conditions in Belarus, society remains focused on freedom and fostering entrepreneurship. The perception of business as a means of minimizing interaction with the state still exists. This policy brief discusses parents’ perceptions of entrepreneurship as a possible area of self-realization for their children in Belarus, to analyze the role of the family in the formation and reproduction of entrepreneurial capital for future generations. The policy brief is based on a representative survey of individuals aged 18 to 64 who reside in Belarus, conducted from June to August 2024. The findings suggest Belarusian parents are largely positive toward entrepreneurship as a future avenue for their children, despite the continuing deterioration of conditions for the business sector.

The perception of private business and entrepreneurship in Belarus has undergone significant transformation over the course of the country’s modern history. Emerging from the Soviet era, which was distinctly anti-entrepreneurial, both the business sector and the Belarusian society have evolved. In a context where mass privatization did not take place, society – initially skeptical of entrepreneurs, often viewing them as dishonest “speculators” – gradually came to recognize that entrepreneurs are generally hardworking individuals who not only generate income for themselves but also create opportunities for others.

Despite the Belarusian authorities’ conservative and often restrictive approach toward business and entrepreneurship, pro-entrepreneurial values have taken root in Belarusian society. This has contributed to the development of a relatively dynamic and productive private sector, increasingly seen as a desirable environment for employment and growth. From 2012 through 2020, the share of the private sector in employment increased by 7.7 percentage points, in export sales of goods and services by 23.9, and in GDP by 14.6 percentage points, respectively (Daneyko et al., 2020).

Over time, businesses in Belarus have thrived, largely due to entrepreneurial skills, investment in human capital, and adaptability to external conditions, rather than reliance on state support or natural resources.

These dynamics further accelerated when Belarusian authorities realized that relying on and investing in state-owned enterprises (SOEs) was not generating the desired economic growth and employment, and a gradual liberalization of business conditions was introduced (Daneyko et al., 2020). This liberalization allowed the government to delay urgent structural reforms needed in the SOE sector, focusing instead on reducing excess employment, which was absorbed by the growing private sector (Chubrik, 2021; BEROC, 2023).

However, following the 2020 presidential elections and subsequent mass protests, the contribution of the private sector to the economy began to be downplayed in official rhetoric. Entrepreneurs were increasingly portrayed as dishonest individuals, profiting from unjustified price increases and lacking loyalty to the state. In response, the government intensified control over entrepreneurial activities, adopting several significant legislative changes aimed at regulating prices and individual entrepreneurs’ activities.

Moreover, the comprehensive sanctions imposed on Belarus in recent years have made the overall business environment more opaque and challenging. These conditions have enhanced the risk of legal violations during business operations, which in turn increases the personal risks for business owners and managers, potentially threatening their personal freedom.

In this hostile environment, families have become the decisive factor influencing one’s decisions about creating businesses and providing emotional, financial, and instrumental support.

Family as a Driver of Entrepreneurial Careers

There is significant evidence that family upbringing plays a crucial role in fostering entrepreneurial qualities and skills in children, which in turn positively influences their interest in starting their own businesses (Chauhan et al., 2024; Osorio et al., 2017). Parents’ knowledge, accumulated experience, and willingness to provide emotional and practical support further encourage entrepreneurial aspirations in children. A family’s support in developing relevant values and qualities also reflects how attractive entrepreneurship is in the eyes of parents.

Families also serve as role models, transmitting best practices and influencing children’s educational and career choices (Edelman et al., 2016). This support can help young people overcome common barriers to entry into entrepreneurship, such as lack of experience, resources, or social capital, increasing the prospect of starting their own.

The role of family support is particularly important in environments with insufficient structural or financial backing for entrepreneurship, as is the case in Belarus (Maleki et al., 2023; Guerrero & Marozau, 2023). In such contexts, the family’s role in fostering entrepreneurial ambition becomes a key factor in enabling the next generation of entrepreneurs to succeed.

Attitudes Towards Entrepreneurs

The perception of business in Belarus is reflected in the general attitude toward entrepreneurs and their role in the economy and society. Parents are the main influencers and role models shaping children’s entrepreneurial attitudes like risk-taking, problem-solving, and independence (Georgescu & Herman, 2020).

In a recent survey of 2,000 Belarusian respondents aged 18 to 64, including 826 parents of children under 18, participants were asked to select the statement that best describes their attitude towards Belarusian entrepreneurs. The findings suggest that individuals with children under 18 tend to have a more positive view of business and are more likely to choose favorable statements about entrepreneurs (see Figure 1).

Figure 1. Attitudes towards entrepreneurs

Graph showing attitudes towards Belarusian entrepreneurs by age and parental status, highlighting views on entrepreneurship.

Source: Calculations based on survey data. Note: The graph displays the answers to the question “Which statement best describes your attitude towards Belarusian entrepreneurs?” and is displayed as percent of respondents in the corresponding group.

Almost half of the respondents who have children under 18 (49.9 percent) describe their attitude towards entrepreneurs as the most positive option choice as they “earn their living through honest labor, generate employment opportunities, and stimulate economic development”. This share is significantly higher than among respondents without children (37.8 percent). A very positive attitude toward Belarusian entrepreneurship is also characteristic of young cohorts of respondents aged 18–24 (47.7 percent) and 25–34 (49.5 percent). This resonates well with the distribution found in a previous study by the IPM Research Center and BEROC (2019) and indicates that recent changes in the official rhetoric and entrepreneurship-related legislation have not yet damaged the public image of Belarusian entrepreneurs and businessmen.

Preferred Careers for Children

In the survey, Belarusian parents were asked to select areas of employment (choosing no more than three options) in which they would like to see their sons and daughters. The vast majority (69.2 percent) chose the option “to run their own business, to be entrepreneurs/freelancers” as the desired future for their children. Among other popular areas of activity were entrepreneurships’ antipoles; work within law enforcement agencies (22.9 percent) and civil service (16.1 percent). Interestingly, the choice of a future related to entrepreneurship for a child does not significantly differ by the child’s gender (see Figure 2).

Figure 2. Preferred careers for children, by gender

Source: Calculations based on survey data. Note: The graph displays the answers to the question “What would you like your child to do in the future?” and is displayed as percent of respondents in the corresponding group.As one might expect, parents-entrepreneurs more often associate their children’s future with entrepreneurship (80.9 percent) compared to non-entrepreneurial respondents (65.7 percent) (see Figure 3). Similarly, female entrepreneur respondents more often than others prefer their daughters to engage in business in the future (80.9 percent). This level of approval of an entrepreneurial future for daughters may be related to an understanding of the self-realization opportunities that business provides for women, compared to other employment options. Working “for themselves” allows women to avoid barriers and limitations encountered when working for an employer and it may also be associated with schedule flexibility and an ability to improve work-life balance.

Figure 3. Preferred careers for children, by parents’ occupational background

Survey results showing Belarusian parents' preferences for their children's future careers, highlighting entrepreneurship.

Source: Calculations based on survey data. Note: The graph displays the answers to the question “What would you like your child to do in the future?” and is displayed as percent of respondents in the corresponding group.

Attitudes Towards Entrepreneurship

The attitude towards entrepreneurship was captured by asking parents to choose what they would tell their children if they expressed the intention to become entrepreneurs. Based on interviews and a pilot survey, multiple statements that carried positive, neutral, and negative connotations were presented in the questionnaire (see Figure 4).

Parents interested in their children becoming entrepreneurs in the future tend to foster a positive view of entrepreneurship through encouraging messages about business. From the results, parents tell their children that business is “dream, wealth, and freedom”, with more than half of the respondents who wish for their children to have an “entrepreneurial destiny” choosing this triad to convey that business is a positive path.

Among those who do not see their children in entrepreneurship, these categories also dominate in justifying the attractiveness of business. However, those parents are more cautious and tend to warn their children about the associated risks of uncertainty and instability.

Figure 4. Attitudes towards entrepreneurship

Survey results on entrepreneurship in Belarus: perspectives of parents on their children's future in business.

Source: Calculations based on the survey data. Note: The graph displays the answers to the question “Which statements best describe what you would tell a child if he/she expressed a willingness to become an entrepreneur?” and is displayed as percent of respondents in the respective group. Respondents were asked to select all applicable response options.

Overall, the selection of positive associations by most parents indicates a high level of support for children’s interest in entrepreneurship within families. By choosing the triad “dream, wealth and freedom”, parents emphasize priorities related to the formation of free individuals and see potential in their children for engaging in business in the future, despite the existence of, and appeal from, other career choices. Employment (regardless of ownership structure) is much less frequently considered as an appealing prospect for children’s future. The likely rationale is the dependent position of employees within the current sociopolitical context, which partially undermines the benefits of private-sector employment. Therefore, many respondents may perceive employment as “captivity” – in contrast to the freedom associated with entrepreneurship. Thus, the current generation of parents largely want their children to have minimal interactions with the state.

Conclusions

Despite the current challenging conditions for business in Belarus, many parents still see entrepreneurship as a pathway to independence and freedom for their children. The role of the family in nurturing entrepreneurial potential should not be underestimated in this context. The fact that many parents see entrepreneurship as a means of self-realization for their children indicates a sustained positive perception of business within the population, despite the recent years negative portrayal of entrepreneurs in official media outlets.

For many, business is associated with the positive triad of “dream, wealth, and freedom”. This is particularly true for the current generation of parents, whose worldviews were shaped during the relatively open periods of the late 1990s and early 2000s. For them, entrepreneurship represents a means for their children to achieve personal freedom and self-realization without having to leave the country.

However, there is a notable contrast between these aspirations and the reality of doing business in Belarus today – a divergence that could prove pivotal for the future of private business in the country. Entrepreneurship in Belarus has the potential to either become a chance for future generations to help develop the nation (“dreaming of entrepreneurship”) or, if suppressed further, a missed opportunity (“requiem for a dream”).

There is no guarantee that future generations of Belarusians will share the same positive attitude toward entrepreneurship and pro-democratic values as their parents, if they lack real opportunities to start and run businesses or public success stories. The “fork” in the future of entrepreneurship in Belarus has another critical dimension: if parents no longer see opportunities for self-realization within the country, they may consider leaving it. Following the 2020 political crisis, Belarus has seen significant emigration driven by the risks of domestic criminal prosecution and the search for safety abroad.

The main implications for the decision-makers concerned with a future stable, predictable and democratic Belarus, could thus be the following:

  1. Supporting entrepreneurship as a driver of democratic values: In a non-democratic environment, entrepreneurs are known to act as carriers and multipliers of pro-democratic values such as freedom, personal responsibility, and self-determination. (Audretsch & Moog, 2022; Marozau, 2023). The (still) positive attitudes to entrepreneurship, intergenerational transmission of entrepreneurial values, and overall survival of the Belarusian private should be perceived, and treated, as a foundation for counteracting (some of the) ongoing negative institutional developments.
  2. Transmitting pro-entrepreneurial values to future generations: With the same idea in mind, it is important to support families transmitting pro-entrepreneurial values to future generations by complementing their efforts through, e.g., education. This can be realized by offering additional training programs for children and adolescents, such as financial literacy schools, business clubs, and leadership schools.
  3. Advancing the role of female entrepreneurship: The increasing participation of women in entrepreneurship presents an opportunity to transfer values, particularly to daughters, and thereby preserving entrepreneurial capital and overcoming gender inequality issues in Belarus.

Acknowledgment

The study underlying this policy brief was made possible by the generous support of the American people through the United States Agency for International Development (USAID). BEROC acknowledges support by Pyxera Global whose financial and technical assistance for INNOVATE is part of a USAID-funded activity to support the innovative-based economy and private sector growth in Belarus.

The contents of this brief are the sole responsibility of BEROC and do not necessarily reflect the views of USAID or the United States government.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

Belarus’s Progressing Economic Dependence on Russia and Its Implications

Posted on October 21, 2024 | Policy Brief

Image showing the border between Belarus and Russia, symbolizing Belarus' economic dependence on Russia.

This policy brief examines the complexities surrounding Belarus’s economy as it deepens its economic dependence on Russia. Recent growth, driven by increased domestic demand and a resurgence in exports to Russia, has surpassed expectations. This trajectory is largely due to Belarus’s mounting dependence on Russia across trade, energy, finance, logistics, and other domains, a dependency that poses significant long-term risks and uncertainties. The Belarusian regime has begun to see this relationship not only as a lifeline but also as a potential source of economic enhancement. However, this approach may blur the lines between sustainable growth and short-term gains, fostering uncertainties about the true nature of this economic uptick. Hence, questions on whether this growth is viable or merely cyclical persist. The uncertainty and progressing dependence on Russia, in turn, imply numerous challenges for the political domain.

New Issues on the Belarusian Economic Agenda

The Belarusian economy continues to surprise, displaying output growth substantially higher than previous forecasts (see e.g. BEROC, 2024). In 2024, the economy is projected to grow by around 4.0 percent. The growth is being driven by domestic demand, fueled by rising real wages and labor shortages. However, an underlying factor is the recent resurgence of exports to Russia. The unexpectedly high growth has allowed for the Belarusian economy to surpass pre-war output levels, at the moment defying earlier predictions of stagnation or decline.

Although the growth period has now extended beyond what could be considered a mere “recovery”, the overall picture – as suggested in Kruk (2024) – still appears relevant. Despite the upturn, the economy remains significantly behind the counterfactual ‘no sanctions, no war’ scenario (see Figure 1).

Figure 1. The Dynamics of Output (seasonally adjusted, index, 2018=100): Actual vs. Counterfactual

Line graph comparing the actual economic output of Belarus with a counterfactual scenario, illustrating the impact of war and sanctions on the country's economic dependence.

Source: Own estimations based on Belstat data. Note: The counterfactual scenario assumes that the Belarusian economy continued to grow uniformly from Q2 2021 to the present, at a sluggish growth rate of 1 percent per annum (a conservative estimate of the potential growth rate before the sanctions were implemented (Kruk & Lvovskiy, 2022)).

Moreover, all the risks to long-term growth associated with total dependence on Russia, potential contagion effects from Russia, etc. are still relevant (KAS, 2024; Bornukova, 2023).

At the same time, a prolonged period of growth gives grounds to think about recent trends also from the perspective of ongoing structural changes in the Belarusian economy. Can these changes, besides implying numerous risks, enhance Belarus’s growth potential and degree of sustainability? If so, to what extent, for how long, and under which conditions? With these questions in mind, it is important to gain a better understanding of what aspects of the Belarusian economy are being transformed due to the increased coupling with Russia and which effects, besides increased dependency and corresponding risks, this coupling generates. Are there any growth-enhancing effects? If so, how sustainable are they?

Belarus’s Growing Economic Dependence on Russia

Belarus’s economic dependence on Russia is reaching unprecedented levels, spanning various critical sectors, with new dimensions of reliance emerging in recent years. This dependence is deeply embedded in the trade, energy, financial, and technological sectors of the Belarusian economy, and recent geopolitical shifts have further intensified these connections.

One of the most evident signs of Belarus’s economic reliance on Russia is reflected in its foreign trade. Russian imports make up around 55-60 percent of all imports to Belarus, with a staggering 80 percent consisting of intermediate goods crucial for industrial production. Energy products, including crude oil and natural gas, form the largest part of these imports, with almost all of Belarus’s energy needs being met by Russia. Exports have also become increasingly concentrated to the Russian market. In 2022-2023 there were several periods when about 70 percent of Belarusian exports were directed to Russia, an increase from about 35-40 percent prior to 2022. This surge was driven by new opportunities for Belarusian firms on the Russian market following Western companies withdrawals. Although competition in the Russian market has since intensified, Russia still accounts for around 60-65 percent of Belarus’s total exports (see Figure 2).

Figure 2. The Evolution of Physical Volume of Exports (2018=100) and the Share of Exports to Russia (in percent)

Graph showing Belarus's exports to Russia and other countries, illustrating the country's growing economic dependence on Russia with a significant increase in the share of exports to Russia post-2022.

Source: Own estimations based on data from the National Bank of Belarus.

A major new development since 2022 is Belarus’s reliance on Russia for transportation and logistics. Sanctions and the war in Ukraine have forced Belarus to abandon its traditional export routes through European ports, leaving Russian seaports as the only viable option for further exports. In 2023, Belarus secured around 14 million tons of port capacity in Russia, primarily for potash fertilizers and oil products exports. Although it is still below the needed volumes, this logistics dependency significantly exacerbates Belarus’s external trade dependency. Taking into account direct exports and imports to and from Russia, as well as mechanisms of logistics and transport control, Russia essentially “controls” up to 90 percent of Belarusian exports and about 80 percent of its imports.

Energy dependency is another critical factor to consider. Belarus imports over 80 percent of its energy resources from Russia, making it vulnerable to any shifts in Russian energy policy. In fact, Russian energy subsidies have played a crucial role in keeping Belarusian industries competitive. In 2022, when global energy prices spiked, the low and fixed price that Belarus paid for Russian gas and the steep discount on oil supplies translated into record-high energy subsidies. These amounted to billions of US dollars and shielded Belarus from the economic fallout other countries experienced due to rising energy prices. Although the value of these subsidies has somewhat decreased in 2023-2024, they remain significant and vital for Belarus.

Belarus’s fiscal situation has also become increasingly tied to Russia. After years of running budget deficits, Belarus achieved a budget surplus in 2023, largely due to Russian financial assistance. For instance, the budgetary item ‘gratuitous revenues’, which mainly includes reverse excise tax and other transfers from Russia, reached a historical high in 2023, securing revenues of around 3.0 percent of GDP. Without this external support, Belarus would likely face a severe fiscal deficit, forcing cuts in social spending and other areas. The scale of Russian financial aid has become a key factor in maintaining budgetary stability, imposing a serious risk for Belarus. Were Russia to restrict such financing, Belarus would almost instantly lose its fiscal stability.

In the monetary sphere, Belarus’s dependence on Russia manifests through the informal peg of the Belarusian ruble to the Russian ruble. Given the deep trade ties and shared currency use in bilateral transactions, Belarusian monetary policy is effectively constrained by Russian economic conditions. The Belarusian National Bank has little room for maneuver, as any nominal devaluation or appreciation of the ruble tends to self-correct through inflation or price adjustments tied to Russian trade. This linkage limits Belarus’s monetary sovereignty and aligns its inflation trajectory closely with Russia’s.

Belarus’s debt structure underscores this dependency further. Of the country’s roughly 17.0 billion US dollars in external debt, about 65 percent is owed directly to Russia or Russia-controlled entities like the Eurasian Fund for Stabilization and Development. In 2022-2023, Russia granted Belarus a six-year deferment on debt repayments, providing crucial breathing room for the regime. This deferment, along with Belarus’s limited access to other international financial sources due to sanctions, has cemented Russia’s role as the primary creditor and financial lifeline for Belarus.

New dimensions of dependence have also emerged within infrastructure, technology, and cyberspace. As Belarus is cut off from Western technologies and financial systems, it increasingly relies on Russian alternatives. Belarus has adopted Russian software for critical functions such as tax administration, giving Moscow access to sensitive financial data. Similarly, with several Belarusian banks disconnected from SWIFT, the country has integrated into Russia’s financial messaging system, further entrenching its reliance on Russian infrastructure. Belarusian companies, particularly in sectors like accounting and logistics, have also shifted to using Russian business software, while consumers increasingly rely on Russian digital platforms for social networks, payments, and entertainment.

An Attempt to Spur Growth Through Coupling with Russia

From the perspective of macroeconomic stability and the traditional view on strengthening growth potential, Belarus’s progressing dependence on Russia is obviously an evil (Kruk, 2023; Kruk, 2024). However, the Belarusian regime sees it as a necessary trade-off, or a “lesser evil”. In 2021-2023, the coupling was done in exchange for economic survival. Firstly, production coupling allowed to counterweight the losses in output associated with sanctions (as niches were freed up in the Russian market) (Kruk & Lvovskiy, 2022). Secondly, the coupling was driven by pressure from Russia and a desire from Belarusian authorities to rapidly obtain some compensations if accepting Russia’s demands. For example, in 2022-2023, Belarusian enterprises were granted a credit line of 105 billion rubles within so-called import-substitution projects.

However, in 2024, coupling with Russia is beginning to look more like a purposeful strategy by the Belarusian economic authorities rather than just a survival strategy. The regime seems willing to sacrifice sustainability considerations in favor of strengthening the growth potential by ‘directive production coupling’, i.e. artificially shaping value-added chains between producers in Belarus (mainly state-owned enterprises) and Russia. For instance, the regime accepted the co-called Union programs for 2024-2026 (Turarbekova, 2024), which encompass numerous activities by the governments of Belarus and Russia aimed at securing ‘production coupling’ in sectors such as machine building, agricultural and automotive engineering, aviation industry, and elevator manufacturing. In some cases, the Belarusian party solely initiates such kind of sectoral activities. It seems that the authorities either accepted the dependency due to the lack of outside options, or they became more optimistic regarding the possibility to spur economic growth through coupling with Russia based on the experiences from the last couple of years. And to some extent, this logic might hold true.

As in the previous two years, the coupling with Russia may, in the short to medium term, more than compensate for certain institutional weaknesses and vulnerabilities in the Belarusian economy. The positive effects may even extend beyond mere cyclical impacts and, under certain conditions, contribute to a semblance of stability for a period of time. For example, economic growth in Belarus could reach some degree of stability under the following conditions:

  • (a) if the war in Ukraine becomes protracted and military demand from Russia remains steady;
  • (b) if the Russian economy continues to grow (albeit modestly) in an environment with limited competition in Russian commodity markets;
  • (c) if specific tools and forms of support for the Belarusian economy remain in place.

Growth driven by a combination of these preconditions could be sufficiently stable as long as they persist. However, the existence of such a status quo is not inherently sustainable and could vanish at any moment. Each of these preconditions is highly unreliable and comes with its own set of determining factors. Thus, one cannot count on the preservation of the entire “package” of preconditions in the long term.

Conclusions

Belarus and its economic prospects are currently in a highly complex situation. The Belarusian economy has been steadily increasing its degree of coupling with Russia, with the ties strengthening both in the range of economic sectors involved and the depth of their integration.

From a long-term growth perspective, the unprecedented level of dependence on Russia is undoubtedly detrimental. In this regard, Kruk’s (2024) conclusion about the economic and political deadlocks remains entirely relevant.

However, as the past two years have shown, this situation can achieve a certain semblance of stability in the medium term. The Belarusian regime is increasingly viewing its coupling with Russia not only as a mechanism for economic survival but also as a means to enhance economic potential. In this way, the growing dependence on Russia, which brings substantial macroeconomic risks, is seen as an unavoidable cost entailed to the only available mechanism to sustain economic growth in Belarus.

How then, should we interpret the related fluctuations in Belarus’s economy? As an increase in economic potential (equilibrium growth rate) or as cyclical acceleration? Traditional economic logic encounters a contradiction here, as the line between equilibrium growth and cyclical fluctuations becomes blurred. An increase in economic potential should inherently be sustainable, whereas cyclical acceleration is inherently transient. Yet, how should we treat a mechanism that might be somewhat sustainable under certain conditions?

This contradiction creates numerous uncertainties, both strictly within the economic domain and beyond it. Economically, it diminishes the effectiveness of conventional macro forecasting tools, making them more dependent on ad-hoc assumptions. For example, if there is indeed an increase in potential, then macroeconomic projections generated without accounting for this channel (e.g. BEROC, 2024) would likely underestimate output growth while overestimating the risks of overheating and destabilization. Conversely, if the model assumes higher equilibrium growth but it proves unsustainable, the forecast could significantly overestimate growth while underestimating macroeconomic imbalances. In other words, the seemingly favorable situation could ultimately be a harbinger of a macroeconomic storm.

These uncertainties are even more pronounced in the political domain. Up to what threshold can an increasing economic dependency on Russia yield macroeconomic gains for the regime? What political consequences can arise if the strategy of coupling with Russia for growth enhancement fails? Can the progressing dependency on Russia undermine the regime politically? If political barriers for democratization are eliminated, what should and can be done to get rid of the dependence on Russia? Are the estimations and prescriptions in Hartwell et al. (2022) – which considers the perspectives of economic reconstruction for a democratic Belarus and the costs of eliminating the dependency on Russia in pre-war reality – still relevant today?

Answering such questions meaningfully using formal research tools ex-ante is nearly impossible. The dependence of macroeconomic sustainability on non-economic factors and motivations leaves little room for an accurate ex-ante diagnosis of the current state of affairs. Only ex-post will we likely be able to reliably assess which diagnosis is closer to the truth. This, in turn, means that we must accept an additional degree of uncertainty in today’s forecasts and projections. Similar challenges are faced by decision-makers in Belarus. As a result, the likelihood of incorrect economic and political decisions due to misdiagnosing the current situation is relatively high, even in the (more optimistic) scenario where the authorities recognize and account for these uncertainties. Such decisions, if made, could not only be costly but might even trigger rapid and drastic economic and political changes.

References

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

An Environmental Perspective on Belarus’s Sustainable Development

Posted on October 7, 2024 | Policy Brief

Traffic under smog in Belarus reflecting environmental pollution and decline

In the last two decades, Belarus has performed better than other CIS countries in sustainable development. However, Belarus has in recent years seen a decline in its global environmental rankings, particularly in the areas of climate action and environment. In 2023, the country’s standing worsened in the Sustainable Development Index, Climate Change Performance Index, and Environmental Performance Index compared to previous years and rankings. This policy brief analyzes Belarus’s performance across these indices and explores the potential causes of recent negative trends and the environmental decline in Belarus. It underscores the crucial role of political and civil engagement in ensuring long-term sustainability of environmental reforms in Belarus.

In recent years, political and economic turbulence has overtaken the public debate about the state of things in Belarus, while environmental issues have taken a back seat. However, tackling climate change is important in any political context, and in this policy brief, we delve into recent developments in Belarus along the environmental front.

Belarus has traditionally done relatively well in regard to sustainable development. For example, in the last two decades, it has consistently outperformed other CIS countries, as measured by the Sustainable Development Goals (SDG) Index, and has been on par with the Eastern European EU Member States (see Figure 1).

However, in the last few years, Belarus’s progress in this dimension has stagnated, and even partially reversed. This brief focuses on one of the drivers of this stagnation – recent developments in the environmental sphere. The brief shows that Belarus worsened its position in three major global indices measuring environmental performance and discusses which components of environmental performance have lagged the most. It proceeds to analyze the underlying causes for this stagnation. The brief concludes by discussing necessary policy measures to improve Belarus’s environmental sustainability.

Figure 1. SDG Index scores for selected countries, 2000-2023

Source: SDG Transformation Center.

Belarus in Global Environmental Rankings

Global environmental rankings are an essential tool for encouraging global efforts to tackle ecological challenges and promote sustainable development. The rankings aim to evaluate a country’s environmental policies and practices and provide a relative assessment of its sustainability efforts, pollution control, and conservation practices. We analyze the performance of Belarus with the help of three well-known indexes: the Sustainable Development Goals Index (SDG Index), the Climate Change Performance Index (CCPI), and the Environmental Performance Index (EPI).

The Sustainable Development Goals Index

The SDG Index measures the progress of countries towards accomplishing the 17 SDGs. Its score can be interpreted as a percentage of SDG achievement (Sachs et al., 2023). It is based on 97 indicators that are grouped by SDGs. The indicators are normalized on a 0-100 scale, and the scores are calculated as averaging across respective indicators. The SDG Index includes the total score and scores for individual goals (Sachs et al., 2023).

The SDG Index scores for Belarus improved significantly between 2000 and 2020, increasing by 8.31 points (see Figure 1). However, since 2020, the score has stagnated and even declined slightly. In 2020, Belarus ranked 23rd out of more than 160 countries. In 2023, it dropped to 30th place, the lowest since 2001.

To a large part, the decline in Belarus’s SDG Index score is driven by a drop in the index for the 16th SDG ”Peace, justice and strong institutions”.  However, Belarus has also faced stagnation in the SDGs that are explicitly related to the environment – such as the index for SDG 7: “Affordable and Clean Energy”, SDG12: ”Responsible Consumption and Production” and SDG13: “Climate Action” (see Figure 2).

Figure 2. Selected SDG Index components for Belarus, 2020-23

Source: SDG Transformation Center.

These developments reflect Belarus’s key challenges, including its excessive reliance on fossil fuels and insufficient focus on renewable energy; inefficient management of waste and emissions, including plastic and food waste; low priority of climate change issues in the country’s economic and social policies, high carbon intensity in the economy and low ambition when it comes to emission reductions. The Belarusian Civil Society Report on the Sustainable Development Goals’ implementation (2022) also refers to similar challenges.

As the SDG Index covers a broad range of sustainability aspects, it may be less precise when it comes to the specificities of developments in the environmental domain. To get a better grasp of these developments, it is useful to consider more refined indices addressing specifically environmental performance and climate change adaptation.

The Climate Change Performance Index

The CCPI is a tool to monitor the climate protection efforts of 63 countries and the EU, which together make up more than 90 percent of global greenhouse gas (GHG) emissions. This index was developed by Germanwatch in collaboration with the NewClimate Institute and the Climate Action Network. Published annually since 2005, the Climate Change Performance Index tracks countries’ efforts to combat climate change. As an independent monitoring tool, it aims to enhance transparency in international climate politics and to enable comparison of climate protection efforts and progress made by individual countries. The CCPI tracks climate protection performances in four areas: GHG emissions (40 percent of the overall score), renewable energy (20 percent), energy use (20 percent) and climate policy (20 percent) (Burck et al., 2024). The CCPI ranks countries’ efforts as very high, high, medium, low, and very low, with the actual scores normalized between 0 and 100.

The CCPI for Belarus has exhibited an uneven development. In most of the considered years, Belarus’s efforts to prevent climate change were ranked as low, except for 2010-2012 and 2018-2019 when they were characterized as medium or moderate. The lowest scores were recorded in 2017 and from 2020 to 2024, highlighting that climate protection has been less prioritized in Belarus in recent years compared to earlier periods.

The relative CCPI ranking for Belarus is similar to the SDG Index (Figure 1). In 2024, Belarus performed worse than the average for Eastern European countries that are part of the EU – their average CCPI score was 55.43. Still, Belarus performed better than some members of this group (Poland (44.4), Czechia (45.41) and Hungary (45.93)). At the same time, Belarus displayed the best results among CIS countries, as Russia scored 31.00, Kazakhstan 38.52 and Uzbekistan 46.68 in 2024, respectively.

While Belarus slightly improved its score in 2024, relative to 2023, it actually moved down the country ranking in all areas considered by the CCPI. The country still received a medium rating in the areas of GHG emissions and energy use. However, the 2024 efforts with respect to renewable energy and climate policy were once again rated as very low, resulting in a relatively low overall ranking in 2024. CCPI experts point to low diversification of imported energy resources, high reliance on fossil fuels, and delayed climate action as key underlying issues.

Figure 3. CCPI Scores for Belarus, 2008-2024

Source: Based on data from Climate Change Performance Index reports 2008-2024.

The Environmental Performance Index

The Environmental Performance Index ranks the performance of countries on environmental health, ecosystem vitality, and their efforts to prevent climate change (Block et al., 2024). It allows tracking of countries’ progress towards established environmental policy targets. The EPI was developed by Yale University in collaboration with Columbia University and is supported by the World Economic Forum and the European Commission. The EPI framework has been repeatedly changed over the years to incorporate more detailed accounting and further indicators. Thus, it is not possible to directly compare EPI levels for different years.

Instead, we look at the evolution of the EPI ranking for Belarus: in 2016 the country ranked 35th among 180 countries, in 2020 it ranked 49th, and in 2022 its position dropped to 55th place.

In 2022, the EPI score for Belarus amounted to 48.5, surpassing all other CIS countries, for which the average score was 39.79. However, Eastern-European EU members all outperformed Belarus, with an average score of 57.92.

It is worth pointing out how differently Belarus performs with respect to the three policy objectives of the EPI. The first component concerns environmental health – it reflects how well a country mitigates environmental risks that directly affect the health and safety of its population and includes issues such as air quality, sanitation and drinking water, heavy metals, and waste management. Belarus’s 2022 score for environmental health was 51.1 earning them a 52nd place. The second component of EPI is Ecosystem vitality – reflecting the performance in the domains of biodiversity and habitat, ecosystem services, fisheries, forests, climate change mitigation, agriculture, and water resources. Belarus’s ecosystem vitality performance was in 2022 substantially better with a score of 55.4, earning Belarus a 41st place. However, the last component of EPI – climate change mitigation efforts, were evaluated as insufficient for Belarus. The country scored only 39.6 in this regard, equivalent to a 94th place.

Reasons for Belarus’s Decline in Environmental Rankings

The recent stagnation and negative trend observed for Belarus across these global environmental rankings warrant an inquiry into the causes of such developments. Plausibly, these are a combination of insufficient effort to address preexisting environmental challenges and consequences from more recent economic and institutional shocks.

Preexisting Environmental Challenges

One of the main examples of preexisting economic challenges is the continued dominance on imported fossil fuels in the energy sector, low diversification of energy suppliers, and only a marginal share of renewables. According to the National Statistical Committee of the Republic of Belarus, the country belongs to the top-20 most energy-dependent countries in the world. In 2020 the share of energy imports to gross consumption made up 83.7 percent, with around 85 percent of these resources imported from a single supplier: Russia (Internation Energy Agency, 2021). The share of primary energy production from renewable energy sources in the gross energy resources consumption continues to be low (7.8 percent in 2020 vs. 5.6 percent in 2015).

Another challenge has to do with the implementation and enforcement of environmental legislation. Belarus has recently developed and extended its legal framework in environmental sustainability. For instance The National strategy of sustainable development for the Republic of Belarus till 2035, was approved in 2020 and the National action plan for the development of a “green” economy in the Republic of Belarus for 2021-2025 was approved in 2021. The first document outlines the general plan for sustainable development in Belarus; the latter sets 11 priorities for the green economy in the country, including the promotion of green financing and creation of smart and energy-efficient cities, climate change mitigation and adaptation to climate change, education and social engagement.

However, the legislation falls short when it comes to practical implementation of the declared goals and mechanisms. For example, virtually no public financing has been allocated for these purposes and other sources of financing are not specified. Also, the National action plan contains only a general reference to the possibility of attracting extrabudgetary funds, foreign financial resources, or other sources.

Economic and Political Shocks

Recent political and economic crises have also had a negative impact on the environmental sustainability in Belarus.

One can begin by considering the substantial, though potentially unintended, adverse effects of sanctions – imposed in response to the widely contested validity of the 2020 elections and Belarus’s involvement in Russia’s war on Ukraine. While it wasn’t their main objective, the sanctions led to the suspension of green projects and initiatives, supported by international organizations such as the World Bank and other UN programs, the EU and the European Bank for Reconstruction and Development, IMF etc., as well as international investments into Belarus. Funding was suspended for several energy efficiency projects and other green initiatives in Belarus, and for projects promoting sustainable environmental practices, energy efficiency, and clean water access – aimed at reducing Belarus’s carbon footprint and enhancing renewable energy capacity.

The political crisis also led to Belarus’s withdrawal from the Aarhus Convention in 2022. The UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters of 1998 outlines every person’s right to a healthy and sustainable environment which includes access to justice, participation, and information. The Aarhus Convention guarantees legal protection to people exercising these rights. Belarus’s withdrawal from the Aarhus Convention has increased the likelihood of being prosecuted for environmental activism, thereby undermining civil society’s involvement in environmental decisions and practices. For example, the Belarusian Civil Society Report on Sustainable development goals implementation (2022) mentions the dangers of publicity and resulting loss of funding for local initiatives concerning sustainable consumption practices.

Another adverse consequence of the political crisis was the massive explicit liquidation of ecological NGOs in the country, accompanied by self-liquidations. This negatively impacted civil society engagement into ecological matters in Belarus.

Conclusion: Addressing Belarus’s Environmental Decline

In recent years, Belarus has worsened its position in three major global environmental rankings, the SDG index, the CCPI and the EPI.

In this policy brief, we have outlined these declines and highlighted how they are linked to a combination of preexisting dependencies and recent economic and political developments.

The continued reliance on fossil fuel imports, insufficient renewable energy integration, and problems with enforceability and implementation of green agendas have collectively contributed to these developments. Additionally, the suspension of international projects and investment in the environmental sphere as a result of sanctions, Belarus’s withdrawal from the Aarhus Convention and the massive, forced liquidation or self-liquidation of ecological NGOs has further aggravated the situation.

To enhance its sustainable development, Belarus should focus on boosting renewable energy use and diversify its energy supply. This includes enforcing stricter environmental laws and reconnecting with global environmental agreements (such as the Aarhus Convention). Additionally, Belarus should incentivize research in green technologies and encourage government and private sector collaboration on environmental initiatives. Well-funded, comprehensive climate action plans with clear targets for emission reductions and renewable energy adoption must be developed and implemented. It’s also vital for Belarus to acknowledge and collaborate with environmental NGOs and actively involve the community in addressing the environmental decline through sustainability decisions and initiatives.

References

  • Belarusian Civil Society Report on Sustainable Development Goals Implementation: Trends since 2016. Vilnius: 2022 — 112 pages. https://library.fes.de/pdf-files/bueros/belarus/19382.pdf
  • Block, S., Emerson, J. W., Esty, D. C., de Sherbinin, A., Wendling, Z. A. (2024). 2024 Environmental Performance Index. New Haven, CT: Yale Center for Environmental Law & Policy
  • Burck, J., Uhlich, T., Bals, C., Höhne, N., Nascimento, L., Kumar, C.H., Bosse, J., Riebandt, M., Pradipta, G. (2023). ‘Monitoring Climate Mitigation Efforts of 63 Countries plus the EU – covering more than 90% of the Global Greenhouse Gas Emissions. Bonn: Germanwatch
  • International Energy Agency. (2021). Belarus Energy Profile. Retrieved from:  https://iea.blob.core.windows.net/assets/a9233b70-ee3e-4a0c-8cde-7a174760b3e2/BelarusEnergyProfile.pdf
  • Sachs, J.D., Lafortune, G., Fuller, G., Drumm, E. (2023). Implementing the SDG Stimulus. Sustainable Development Report 2023. Paris: SDSN, Dublin: Dublin University Press, 2023. 10.25546/102924.

Disclaimer: Opinions expressed in policy briefs and other publications are those of the authors; they do not necessarily reflect those of the FREE Network and its research institutes.

About BEROC

BEROC promotes a market economy in Belarus through research, education, and public dialogue. It conducts academic and policy research, organizes educational programs, and fosters collaboration between Belarusian and international economists. BEROC is part of a research network including SITE (Stockholm), BICEPS (Riga), CEFIR (Moscow), CenEA (Szczecin) and KSE/KEI (Kiev).

To read more policy briefs published by BEROC, visit the Institute’s page on the FREE Network’s website.

Belarus Economy: GDP Growth, Inflation, Labor Shortages | August 2024

Posted on August 7, 2024 | News, Videos

Workers operating a blast furnace in a metallurgical plant representing Belarus Economy in 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

We invite you to view the full BEROC webinar, which is now accessible on the official BEROC YouTube channel. Moreover, for further details, please visit the BEROC website. Additionally, if you are seeking to explore more policy briefs published by BEROC, you may do so by visiting the Institute’s page on the FREE Network’s website.

Disclaimer: Neither BEROC, the FREE Network, nor their representatives can be held responsible for the use of the information contained in this press release. Despite thorough preparation, BEROC and its representatives do not guarantee or assume responsibility for the accuracy, completeness, or reliability of the information. BEROC is not liable for any losses or damages arising from the use of the provided information.