Macro: COVID and Economic Update Belarus: Economy under double pressure - pandemic and protests

Coronavirus: According to official statistics, the second wave of the pandemic started in Belarus from the end of September. However, in contrast to the first wave, the state closed the borders from 1 November and recommended a mask regime nationwide. Nevertheless, schools, kindergartens, universities are still open. Apart from that, more than 120 days of protests against the results of the 9th-August elections have been going on.
Growth Outlook: Due to the absence of lockdown measures and the uninterrupted operation of the industrial sector, a significant GDP drop projected at the beginning of the year was avoided. For 10 months economic output decreased by only 1.1% YTD. In addition, the industrial output dropped by 1.2% for 10 months YTD vs 3.1% in 1H of 2020. The strong negative impact on the economy expected in the beginning of the year has been mitigated by uninterrupted industries, support for domestic demand through wages increases ahead of elections and a positive foreign trade trend.
Inflation outlook: Despite the NBBs efforts, inflation has accelerated and reached 6.2% in October. According to the regulator, August BYN devaluation along with high inflation expectations became the main price trigger especially for imports and non-food goods prices. As we expected, at the 11th November Board Meeting, the NBB took the decision to keep the key rate at the current 7.75% level.
Fiscal policy: According to the Ministry of Finance, in Jan-Oct budget deficit made up BYN 0.13 bn or 0.1% of GDP vs BYN 1.96 bn in September. The ministry has adjusted its deficit outlook several times since that and now it expects the budget gap of BYN 3-5 bn. With respect to the public debt, for 10 months it amounted to BYN 57.9 bn having increased by 29.3% from the beginning of the year. Apart from that, external public debt climbed to an historical maximum and reached USD 18.1 bn or 29.8% of GDP. Following S&P, the rating agency fitch Fitch also changed its outlook on Belarus from stable to negative keeping its long-term and short-term foreign-currency and local-currency issuer default rating at 'B'.