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New Market Report: Belarus Business Forecast Report Q4 2013

Recently published research from Business Monitor International, "Belarus Business Forecast Report Q4 2013", is now available at Fast Market Research


Boston, MA -- (SBWIRE) -- 10/28/2013 -- The breakup of the Belarusian Potash Corporation (BPC) and the subsequent arrest of Uralkali chief executive Vladislav Baumgertner has led to a severe deterioration in the relationship between Belarus and Russia, and poses significant threats to the Belarusian economy.

Punitive embargo's placed on Belarusian exports by Moscow, and a decline in potash production will exacerbate the country's current account deficit and impact negatively on real GDP growth in 2013 and into 2014.

The Belarusian ruble is set to depreciate further in the months ahead as the currency comes under increasing pressure from a current account deficit which is set to rise through the remainder of 2013 and into 2014, and FX reserve levels which, although increasing, still remain woefully inadequate to cover the country's imports.

Consumer price inflation has continued to fall throughout the course of 2013, coming in at our year-end target of 15.0% year-on-year (y-o-y) in August. Declining food price inflation, which carries the heaviest weighting (47.2%) in the consumer price basket, has been the primary driver behind the fall in the headline rate. Inflation is set to tick up in 2014 as the weakness of the ruble exacerbates imported inflation.

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Major Forecast Changes

We have revised down our forecast for real GDP growth in 2013 and 2014, from 0.3% and -1.1% to -0.4% and -2.8% respectively, as the impact of the decline in potash production leads to falls in net exports and fixed capital formation. In addition, household consumption growth is set to weaken as rising inflation reduces households' purchasing power.

Our forecast for consumer average consumer price inflation in 2014 has been raised from 12.5% to 17.5% on the back of the likely weakness of the Belarusian ruble. We have also raised our forecast for the Belarusian refinancing rate in 2013 and 2014, from 15% and 10% to 23.5% and 25%. We do not believe the central bank will risk further rate cuts in 2013 for want of a weaker ruble, and will be forced to raise rates in 2014 to stem inflationary pressures.

The Belarusian current account is set to widen significantly over the coming quarters as potash, petroleum and pork exports decline as the effect of the brewing trade war with Russia becomes apparent. Therefore we have significantly altered our forecast for Belarus's current account deficits to 9.4% of GDP and 9.5% in 2013 and 2014 respectively, from 2.3% and 1.2% previously.

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