Belarus Economic Forecast

According to available data, the economy continued to decline at the start of 2023 but at a slower pace: GDP fell 2.1% year on year in January–March, softening from Q4’s downturn. A recovery in the industrial sector—output reached a 22-month high in March—will have boosted the reading. Additionally, consumer price inflation more than halved between January and March, and wages returned to growth in the final month of the quarter, likely encouraging private spending; retail sales posted a smaller year-on-year contraction in Q1. On the external front, merchandise exports rebounded in February, posting a one-year high despite the chokehold of Western sanctions. Less positively, declining credit demand through March poses a risk to consumer spending and business activity.

Inflation nosedived to 5.8% in March (February: 11.6%) on falling food prices. Despite disruptions from the war, our panel sees the headline rate cooling from 2022’s eight-year high in 2023 on lower commodity prices, strict government price controls and an ailing economy. The emergence of parallel markets arising from anti-inflationary measures poses an upside risk.