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Belarus market Overview

The Republic of Belarus follows a socially-oriented model of economic development. The public sector exercises control over the market and the economy, while only a few sectors, such as retail trade, are dominated by the private sector (over 80%).

The construction sector in Belarus is booming as the country embarks on a widespread programme to upgrade its transport and logistics infrastructure, meet rising demand for commercial and retail space, and built tens of thousands of new homes.

In the first nine months of 2010 alone, the value of investment in Belarus’s construction sector rose 25%, and there has been a steady influx of foreign firms to take advantage of the opportunities on offer.

Commercial real estate is one of the fastest growing parts of the Belarusian economy – growing almost 18% in 2010 – and will be boosted in coming years by government plans to construct more modern retail sites. 

The residential sector has also grown impressively with increased demand for high quality privet housing at a time when neighboring markets have slowed or stagnated. The government plans to develop 10 million square metres of housing a year from 2011, with foreign investors invited to tender for projects. In Belarus, the state support of housing con­struction for the general population remains in place, and over 500,000 families in need of better housing have been added to different governmental lists. This makes it possible for them to build accommodations at prices controlled by the state, and also gives them the opportunity to use state bank loans with preferential in­terest rates that differ considerably from commercial loans.

The sector has been greatly helped by recent reforms including the creation of a one-stop-shop for property registration, which reduced the procedure to less than one month, placing Belarus 14^th best in the world according to the World Bank. The country has also streamlined and sped up the process to obtain construction permits. The time taken is now below the OECD average and better than in the UK, Australia, Czech Republic and Russia.

Belarus’ construction sector also benefits from being self-sufficient in labour and materials. In 2009 the building material industry made up 4.1% of total industrial production.

Credit ratings

The financial services company Standard and Poor’s has assigned a B+ foreign-currency long-term sovereign credit rating, a BB local-currency rating, and a B short-term sovereign rating to Belarus. Standard and Poor’s said the ratings reflect the state’s domination of the Belarusian economy, the country’s weak external liquidity, and the uniquely centralized nature of the Belarusian political system, which reduces the predictability of policy choices. On the other hand, the company noted that the ratings are supported by comparatively high wealth and development levels, low general government debt, a relatively strong external balance sheet, and significant economic potential due to substantial industrial capital stock and a highly educated workforce. A country’s sovereign credit rating is a reflection of confidence in its ability to honor its hard-currency borrowing commitments.

Moody’s Investors Service gave Belarus an issuer credit rating of ‘B1′ in August, 07. The ratings reflect both the recent macroeconomic successes of Belarus and the likelihood that rapidly increasing energy prices from 2007 onward will occasion substantial restructuring of enterprises and may lead to a deterioration of some macroeconomic indicators.

Economic Freedom

Belarus is ranked 145th out of 157 nations.

2007 report notes that economic freedom remains on the rise. The average economic freedom score rose from 5.1 (out of 10) in 1980 to 6.6 in the most recent year for which data are available. Of the 102 nations with scores in 1980 and in the most recent index, 90 recorded improvements in their economic freedom score, and just nine saw a decline. In this year’s index, Hong Kong retains the highest rating for economic freedom, 8.9 out of 10, followed by Singapore, New Zealand, Switzerland, Canada, United Kingdom, and the United States.

The first Economic Freedom of the World Report, published in 1996, was the result of a decade of research by a team which included several Nobel Laureates and over 60 other leading scholars in a broad range of fields, from economics to political science, and from law to philosophy. This is the 11th edition of Economic Freedom of the World and this year’s publication ranks 141 nations for 2005, the most recent year for which data are available.

Human Development Index

Each year since 1990 the Human Development Report has publishedthe human development index (HDI) that looks beyond GDP to a broaderdefinition of well-being. The HDI provides a composite measureof three dimensions of human development: living a long and healthylife (measured by life expectancy), being educated (measured byadult literacy and enrolment at the primary, secondary and tertiarylevel) and having a decent standard of living (measured by purchasingpower parity, PPP, income). The index is not in any sense a comprehensive measure of human development. It does not, for example, include important indicators such as inequality and difficult to measure indicators like respect for human rights and political freedoms. What it does provide is a broadened prism forviewing human progress and the complex relationship between incomeand well-being.

The HDI for Belarus is 0.794, which gives Belarus a rank of 67th out of 177 countries.

Political Structure

The Republic of Belarus is a unitary, demo­cratic, socially-oriented, law governed state. The head of the state is the President of the Republic of Belarus.

Currently, Alexander Lukashenko holds this post. He was elected to this position in July 1994, re-elected in both September 2001 and March 2006, for a current third consecutive term of presi­dency.

Executive power is exercised by the Government, which includes a Council of Ministers ap­pointed by the President, and is headed by the Prime Minister, currently Sergey Sidorsky. There are seventeen political par­ties officially registered in the Republic of Belarus. In its foreign policy, Belarus sticks to a multi-vector good-neighbor policy.

Economy of Belarus

Belarus has enjoyed strong economic growth since its independence in 1992, with its export-led development carefully managed to balance growth with social responsibility.

• Gross domestic product grew at an average rate of 8.7% a year between 2002 and 2008, and the economy has continued to expand despite the global slowdown

• Year-on-year growth to February 2009 was 2.3% and the International Monetary Fund forecasts 1,6% in 2010 rising to 5.7% by 2014

• Consumer Price Inflation in 2009 was forecast to be 11%, falling to 10% in 2010

• Standard & Poor's, the rating agency, has given Belarus a sovereign credit rating of B+, while Moody's issued a B1 rating

• Almost half of Belarus' national income comes from the physical, manufacturing side of the economy, and around 40% is generated by the expanding service sector. Around two-thirds (70%) of economic output comes from state-controlled enterprises

Emerging Retail Market

As Belarus has grown and prospered, there has been a corresponding increase in disposable income and, in turn, the emergence of greater consumer demand - which has yet to be met -and will continue to grow at a rapid rate.

GDP per capita was approximately US $5,000 in 2008 and disposable income hit US $30 billion, amount in 2005, as real incomes grew at an annual rate of 12%.

The International Monetary Fund expects domestic demand to grow by 1.3% in 2010, 4.6% in 2011 and 8.3% in 2012.

Until recently this rapidly expanding market remained out of sight of foreign investors and, even now, only a small number of multinational businesses have woken up to its potential.

Foreign Investment

Belarus has been determined to boost foreign investment to capitalize on its domestic liberalization and privatization programme, In 2008 it drew total overseas investment of US $6.5 billion, of which US $2.23 billion was direct investment, up 28.9% on 2007, which in turn saw a five-fold increase on 2006.

In November 2008 Belarus held its first investment forum in London, and trade delegations have been travelling the globe to attract interest. The majority of investment in 2008 came from EU states (43%) and Russia (33%).

At the last measurement, nearly 3,000 companies have been started in Belarus with foreign backing, with investors from 77 countries choosing Belarus. The leading investors have been Russia, the UK, Switzerland, Austria, Germany and the Netherlands.

The most favoured sectors for investors have reflected Belarus' traditional strengths with machine-building and metal-working, chemical and petrochemical, and timber/woodworking the most popular. Consumer goods, retail, communication, transport and medical sectors have also proved attractive.