Development since Independence

At independence in 1991, Belarus inherited one of the highest standards of living in the Former Soviet Union (FSU). Since then, the country has passed through several political and economic phases.

From 1991-1995, with the support of international organisations, Belarus initiated preliminary reforms toward transformation to a market economy.

Following an estimated decline of close to 40% during the period 1992-95, GDP growth resumed in 1996. Since then statistics show a continuous and substantial growth in GDP and industrial production, reaching a peak in 1997-1998. Growth began at a time when almost all other FSU countries continued to experience decline, and persisted through the regional economic crisis of 1998-1999. Rates of GDP growth in 1999-2002 in the aftermath of the Russian financial crisis of 1998 were relatively moderate, but accelerated after 2001.

The economic growth during 1996-2000 could be explained largely by active political re-integration with Russia, which resulted in improved market access; and government policies that provided sizable net benefits for many leading exporters through the real depreciation of the rubble and an increase in implicit subsidies, especially through subsidized interest rate. Since end-2000, the role of the initial growth drivers has gradually been declining. However, new factors have emerged that have helped to sustain growth, namely: (a) drastically improved external environment; (b) strengthened domestic demand; and (c) improved financial performance of domestic enterprises.

Strong growth in labour-intensive sectors (such as services, food processing, and machinery), backed by the government wage and income policies, ensured broad sharing of recent growth across the population. The result has been a rapid decline in poverty rates with inequality remaining stable and low (Gini coefficient 0.262 in 2006). The poverty headcount ratio (national definition) fell from 41.9% in 2000 to 11.1% in 2006.

Challenges ahead

Belarus has the potential to provide high levels of income for its population. Located strategically in the corridor between Russia and the EU, Belarus is a major transit route for energy and other products. It has access to growing regional markets. It can benefit from a greater degree of regional integration in trade, energy, environment, etc. The country has ample natural resources. Above all, the population is highly educated. However, to benefit from these opportunities, the country needs to address a number of critical challenges and to demonstrate:

• Increasing energy efficiency and self-sufficiency;

• Facing up to the global environment challenge;

• Enhancing competitiveness through imposing stricter market discipline and encouraging new business growth;

• Continuous increasing productivity, while building a sturdier and more diversified economy;

• Improving the effectiveness of the government.

The Official Website of the World Bank,

April 2009