The year 2013 is crucial for intensifying efforts to improve the quality and living standards of the population, President of Belarus Alexander Lukashenko said when meeting with the members of the Government and the National Bank to receive the report on the economy performance in 2012, evaluate the year-end results and the budget and monetary policy forecasts for 2013.
“The year 2013 is a special year for us. This year is crucial for meeting the targets of the entire five-year period and intensifying efforts to improve the quality and living standards of the population we have determined earlier. This is the number one goal. This is the reason and essence of the further development of the production sector and the social sector,” the Belarusian leader said.
Alexander Lukashenko emphasized that all the plans should have a raison d'etre. “Therefore, before making projections, we need to identify the most urgent problems, think of ways to conclude this year on a positive note and create some foundation for the next year no matter how hard it might be for us,” the head of state said.
The efforts put in this year have resulted in a stable economic development on the macro-level. The industrial output is growing (the growth rate nears 109%), in agriculture (over 107%). “We have a deficit-free budget, stable gold and foreign currency reserves estimated at over $8 billion,” the President said.
"The average salary has risen almost to Br4 million. This is a little more than $470. By the end of the year we will reach the target of $500. Real money incomes of population increased by 17.5% and real wages by 21.5%,” the head of state said.
“However, we are no longer happy with these results, because some problems impeding the country’s progress still persist,” Alexander Lukashenko said.
Belarus might fail to meet four out of twelve most important targets set for 2012, including the number one target - GDP. GDP growth rate now makes about 103%, instead of the projected 105.5%.
According to the head of state, increasing prices are still a major concern for people. Prices continue rising though exchange rate of the Belarusian ruble has stabilized, the Belarusian leader underlined.
Alexander Lukashenko remarked that he was seriously concerned that the export growth rate of automobiles, agricultural machines, household appliances, metallurgy and woodworking products is either falling or has slowed down. Many branches of the production sector still have problems with overstocked finished goods inventories. No considerable improvement regarding payments in the economy has been registered. “Since the beginning of the year overdue accounts receivable have gone up by 30%, with overdue accounts payable up by 32.5%. It is considerably higher than the inflation rate in this period,” Alexander Lukashenko stated. “The main debtors are still economic entities in the Russian Federation. Besides, the overdue debts of the Russians have surpassed the debts of Belarusian enterprises (to Russian partners) two times over. It is abnormal that we, who have considerably less financial resources than Russia does, credit economic operations of our partners. By the way, we are doing it not only in the Russian Federation,” the President added.
Alexander Lukashenko underlined that the lack of own resources and high borrowing costs slow down investment efforts. He said the situation in the regions was alarming: “I have to admit that the governors fail to pay attention to the development of the real sector. Investment efforts are weak”. For instance, only Vitebsk Oblast and Minsk Oblast have managed to hit the targeted gross regional product growth. Vitebsk Oblast did it primarily thanks to the petrochemical industry.
“Virtually all the regions are slowed down by the civil engineering industry. It seems that in previous years our ministers and governors got accustomed to only spending the budget appropriations. Where is your concrete work?” the President asked. Alexander Lukashenko pointed out problems in the animal husbandry industry. Cattle sale for slaughter tends to fall.
“We need comprehensive development of territories, including the industry and the services sphere. Neither the government nor the governors should hide behind the lack of money. Chinese loans alone have made over $8 billion available to us. But the borrowed resources will naturally be channeled only in cutting-edge projects,” the President said.
“I have given instructions to finish all the organizational work required for complex modernization of state-run enterprises. Every head of a company should have a modernization plan aimed at manufacturing competitive products that will primarily substitute imports and will be exported. It is the most important thing,” the head of state stressed.
“Piotr Prokopovich has been returned to active duty at the top level and he has been entrusted with the task. It is his prime task. He has to examine modernization aspects of each and every enterprise, verify the availability of a concrete plan aimed at manufacturing top level products. This is my instruction to him, it has been forwarded to the government,” Alexander Lukashenko remarked. “If we fail to upgrade our enterprises, fail to start manufacturing modern products, there is no place for us here. By 2015 we must reach at least $60,000 in proceeds per employee. It is a concrete indicator. You cannot play with it,” Alexander Lukashenko said.
The head of state remarked that the policy “money for a breakthrough project” is being implemented these days. “A project should pay for itself, it should be oriented into the future. Only for this project will foreigners give money and will we find money inside the country. Nobody will give us anything for nothing,” Alexander Lukashenko stressed.
“Russia’s accession to the WTO will make SES markets an arena of tough competition. European and American manufacturers as well as Asian companies are hard at work exploring the markets of Kazakhstan and Russia. All in all, the situation in the global economy will get more complicated,” the head of state said.
Alexander Lukashenko said he wanted to hear how the national economic security will be ensured and what will be done to secure export growth and a foreign trade surplus in 2012 and 2013.
“We must undoubtedly keep the foreign currency coming into the country for the sake of raising the gold and foreign exchange reserves and keeping the currency market stable,” the head of state said.
Alexander Lukashenko also underlined that it was necessary to hit the targeted salaries and real cash income of the Belarusians. Alexander Lukashenko stressed that the strong connection between the pay rise and labor productivity would remain the most important principle. “We should give people an opportunity to earn money,” the President said.
“I would like to warn each member of the government and each governor: the targets set for this year and foundation for the next year should be secured by all means. All the government officials across the entire vertical should be mobilized to address the designated issues,” the Belarusian leader emphasized.
The President demanded a clear answer to a number of questions: “What is being done by the government and the National Bank to address the existing issues? What are the objective prospects for the current year and the year to come? Are the suggested projections really arduous for all the sectors of the economy and finance? Are we not trying to make it easier for ourselves? All these matters should be dealt with bearing in mind the targets of the five-year period”.
Prime Minister of Belarus Mikhail Myasnikovich explained that the country’s economic performance in January-July 2012 has created crucial macroeconomic preconditions to meet the 2012 targets and secure economic growth. The commodity export rose by 34%, the foreign trade surplus was estimated at $3.6 billion. The net foreign currency earnings exceeded $3.4 billion. The number of loss-making companies reduced by 14.5%. Some 553 social facilities are being built.
The Premier noted that in order to meet the GDP growth targets, the gross regional product should be considerably expanded in Brest, Grodno and Gomel oblasts; Bellegprom Concern and Bellesbumprom Concern, the Architecture and Construction Ministry and the Industry Ministry should also intensify their efforts to meet the major targets.
The governors and ministers assured that the major targets set for 2012 will be fulfilled.
As for the 2013 targets, they are closely related to the 2012 targets.
The GDP growth should make 8.5%, the export of goods and services should increase by 15.2%, the foreign trade surplus should make up 0.7% of GDP or $500 million, capital investments should expand by 6%, commissioning of new houses – 6.5 billion square meters.
Mikhail Myasnikovich noted that the next year targets are more challenging than the 2012 ones; however, the fulfillment of these targets, no matter how ambitious they are, will not be enough to fulfill the three-year targets of the socioeconomic development program of the five-year period.
At the same time, the government admits that it will be extremely hard to meet the economic growth targets set for 2013. The main reason that Belarus' major trade partners forecast low growth rates in 2013.
In 2012 Belarus advanced to 15 new markets, including Sudan, Laos, Paraguay, the Congo, Chad, Togo, the Bermudas. The exports to the new markets made up $335 million over the seven months this year. However, the government demands more efforts to penetrate new markets.
In order to achieve targeted trade surplus and GDP growth, Belarus will have to export 65% of industrial products and 20% of agricultural goods in 2013.
According to the Prime Minister, export accounts for 84% of Belarus' GDP. This means that the economy is open. Just to compare: export makes 13% of GDP in the United States, 22% in India, 27% in China, about 30% in Russia and Great Britain, 42% in Poland, 50% in Ukraine. However, as opposed to Belarus, these countries can stimulate the economy by boosting domestic demand.
Te government is planning to meet 2013 targets by fulfilling five basic conditions. First, labor productivity should outstrip growth rate of real salaries (109.3% and 107.1% respectively). Second, there should be foreign trade surplus in goods and services of at least 0.7% of GDP. The third condition is deficit-free budget without the increase in domestic debt and emission to finance current expenses. Fourth, the refinancing rate should be higher than the inflation rate. Fifth, the country should raise at least $4.5 billion in foreign direct investment.
The main criterion is macro-economic balance of the target budget and main aspects of the country's monetary policy.
“Let us agree: the main thing is export. Once we had a formula: export - housing - food. Two of these areas ceased to be the most important. Export is the one that remains. Everything depends on it: we must export 85% of what we produce, sell it at a good price to ensure ourselves a normal life. This is our most important priority. Therefore, there should be no complaints about tough targets,” Alexander Lukashenko stressed.
In 2013 export should generate almost two-thirds of the GDP growth. The government proposes to set out the export growth target to each business entity with a share of state ownership. These parameters are linked with regional-country targets which have been set out to Belarus’ foreign establishments.
In 2013, Belarus is set to export $53 billion worth of goods, well above the $45 billion targets in 2012. Given that the share of the manufacturing industry in merchandise exports is 90%, it will lay the crucial role in implementing the export strategy. Therefore, the budget appropriations in 2013 for export promotion will be three times as much as in 2012. On 1 January 2013, the VAT refund from the budget for exporters will be facilitated. The government has spelled these proposals in the draft tax code.
Exports of agricultural products are projected to increase by 12%: from the expected $4.8 billion in 2012 to $5.4 billion in 2013.
Economic modernization is another priority in 2013.
The government is planning to approve all targets regarding the growth of proceeds per one employee, value added and salaries for the five-year period.
"One should not expect that we will finance modernization regardless of the effect. We cannot waste resources on commercially unviable projects which will never pay for themselves. The funds should be provided on commercial terms, by banks, by investors. The state will cover a part of interest payments," the Prime Minister stressed.
In 2013 Belarus will raise record high investments in the amount of $20 billion, of which 23% will be provided in form of bank loans. Taking into account high interest rates on loans, the 2013 budget will have necessary funds to make them cheaper. All companies which have a promising project and fulfil plans of comprehensive modernization will have access to the resources to make loans cheaper.
Mikhail Myasnikovich reported that there are plans to build 6.5 million square meters of houses in 2013. Soft loans will be provided within the fixed social limits. Next year investment in housing construction will increase 1.5 times to $2.4 billion, investment in infrastructure – 2.8 times to almost $1 billion. The government believes that rapidly developing infrastructure will set the pace for individual building and commercial housing. The estimates predict that the construction industry will be supplied with a sufficient amount of domestic construction materials. Moreover, exports of construction materials will be on the rise, too.
Another key aspect on the agenda was the social sector and people's salaries.
According to the Premier, the instructions to raise the average salary to the equivalent of $500 by the year-end will be fulfilled. At the same time he admitted that the pay rise has recently surpassed the labor productivity. The government is determined to correct the imbalance in the coming months.
Next year plans envisage an average salary of more than $600 in December 2013. The annual increase in the population income will make up Br70 trillion.
There are also plans to boost employment. Tough tasks for every region are envisaged in the relevant program for 2013. Thus, the goal is to open at least 10 companies in every region with the staff of 50 and up for each in H2 2012-2013. The move will contribute 1% to GDP.
Alexander Lukashenko has warned against failing to achieve the 5.5% GDP growth target in 2012. The President emphasized that the target should not be achieved by means of increasing finished goods inventories. He instructed the Head of the Presidential Administration to take this matter under personal control.
“When you produce something, you should sell it and get money for it. Products should not be sold at a bargain price! We need money, not just sales for the sake of sales,” the head of state said.
According to the Chairperson of the Board of the National Bank Nadezhda Yermakova , the major goal of the monetary policy in 2013 is to support price stability in the economy. Not least important is to increase the gold and forex reserves to the level that ensures economic security of the country. Gold and foreign exchange reserves are projected at $8.7 billion next year taking into account the five-year plans to increase their reserves to the volume of the three-month import with due consideration of its growth.
The exchange rate will remain flexible basing on the demand/supply at the domestic currency market. The National Bank of the Republic of Belarus will carry out interventions both in the currency purchase and sale only to curb short-term sharp fluctuations, Nadezhda Yermakova added.
In her words, the key rate will largely depend on the macroeconomic situation including the foreign economic sector and the currency market. “Keeping the current favorable and positive trends in the economy as well as consistently reducing inflation, the main interest rate might go down to 13-15% next year. Its average in this case is estimated at 15-16%,” Nadezhda Yermakova said.
Alexander Lukashenko refuted rumors of possible devaluation and redenomination of the Belarusian ruble. “There is too much talk today about devaluation, redenomination and so on. The draft budget contains trillions of Belarusian rubles and we do not envisage any devaluation and, the more so, redenomination,” the head of the state said.
“You should explain people that we are not going to let any devaluation. There is no need to devaluate the national currency today. We do not restrain the exchange rate. These rumors are definitely spread by the opposition who intends to play havoc in the country,” the President noted.
Belarus President Alexander Lukashenko also suggested a differentiated approach to calculating utility tariffs.
In his words, the approach should take into account the difference in income. The President also warned the government against excess spending on utility needs, especially in the private sector where people should be able to address the issues themselves apart from those who really need state support.