Belarus

In-depth country-focused analysis on Belarus's economic, political and operational risk environment, complemented by detailed sector insight

Belarus

Our comprehensive assessment of Belarus's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Belarus, as well as the latest industry developments that could impact Belarus's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Belarus before your competitors.

Country Risk

Belarus Country Risk

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Core Views

* .The ongoing crisis in Ukraine will ensure support for President Alexander Lukashenko remains robust in the run up to the 2015 presidential election. Opinion polls indicate voters prefer the stability engendered by the regime to the uncertainty following the ousting of the president, and we believe the government will continue to divide its focus between closer Russian and EU relations.

* The Belarusian economy will remain in recession until 2016 as the fallout from Russia's economic crisis spreads. Stagnant real wage growth driven by high inflation will cap consumer spending, while collapsing demand from Russia and Ukraine will exacerbate Belarus' external imbalances and ensure that net exports remain a drag on growth.

  • Consumer price inflation to remain high in Belarus over the next two years as the ruble&#...

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Belarus Operational Risk Coverage (8)

Belarus Operational Risk

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Belarus' operating environment is boosted by its relatively large, skilled and highly urbanised labour force. Enrolment rates are high across all levels of education, meaning that investors in the country will enjoy access to an educated labour pool. However, businesses face risks associated with an ageing population suffering from numerous health problems, which threatens to reduce worker productivity and increase operational costs. While employers benefit from the country's low national minimum wage, labour taxes are high and therefore increase overall employment costs. Moreover, the high levels of university graduates are leading to a brain drain and the lack of vocational skills among the workforce means that there is a growing mismatch between available skill-sets and labour market needs. Belarus receives a score of 58.1 out of 100 for Labour Market Risk, in seventh position out of 31 countries in Emerging Europe and 50th out of 201 states...

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Belarus Operational Risk

Belarus Labour Market

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Belarus' very large and highly skilled urban labour force is a significant incentive for investors from a range of sectors. The country's high educational standards and enrolment rates from primary through to tertiary level mean investors can expect a high level of literacy and numeracy across the country. That said, health risks are high, raising the possibility of lengthy absenteeism. For these reasons, Belarus scores 59.1 out of 100 for Labour Market risks, tying for tenth position with Latvia in our regional Labour Market Risk index.

With its large labour force, urbanised population and good primary education system, there is a very high availability of labour with a consistent level of basic skills. The availability of labour is somewhat diminished by major health problems resulting from the Chernobyl nuclear catastrophe in 1986, the victims of which are still being accounted for. In particular, thyroid cancer has been one of the major...

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Belarus Logistics

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Belarus' supply chain needs are currently being met, with the country's trade demands little changed from when it was a member of the Soviet Union. Neighbouring Russia plays a dominant role in both imports and exports, with Belarus' logistics network focused on importing crude oil from Russia, which it then refines and exports back. The lack of demand for this supply chain to diversify, coupled with the massive challenges that would need to be overcome for such a change, makes Belarus an unattractive destination for investment, a view shown by the country's below-average global score of 43.1 out of 100 in our Logistics Risk index, in which Belarus is 22 nd out of 30 emerging European countries.

Belarus' dependence on Russia and its state-run economy limits growth prospects, and therefore the country's attractiveness to investment. The population is in decline, which will affect future consumer demand as well as public capital...

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Belarus Trade & Investment

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The Belarusian economy follows the Soviet model. It is dominated by parastatal firms and is tightly regulated by government, which distorts market forces. International companies find it difficult to compete, especially given the high levels of corruption that pervade the economy and public administration. Business opportunities are thus limited, and the risk of doing business is high, and Belarus has very poor levels of economic openness and a high degree of legal risk. Government intervention presents the lowest degree of risk in the three pillars of our Trade And Investment Risk index. Belarus scores 48.0 out of 100 in the index, and ranks 24 th in the region.

The economy is dominated by government-owned enterprises which hold a monopoly on key sectors of the economy, while the government has the power to set prices and regulate the market. This limits the competitiveness of the private sector and deters foreign investment,...

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Belarus Industry Coverage (5)

Defence & Security

Belarus Defence & Security

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BMI View: Throughout 2015 we expect Belarus to continue to align its security and economy with Russia, even though the former has begun deepening its diplomatic links with Western Europe. That said, the two countries are currently embroiled in a dispute over the break-up and a joint venture in the potash industry, although this seems to be having little effect regarding the two countries' diplomatic relationship.

In 2014 we expect Belarus to spend USD821.9mn on defence. The country's year-on-year (y-o-y) defence expenditure is set to increase markedly during our forecast period. In terms of percentage of gross domestic product, Belarus has spent an average of 1.3% of its GDP on defence up to and including 2014. We expect this proportion of defence expenditure to remain until 2019.

We have given Belarus an overall security risk rating of 76 out of 100 for Q115, with the...

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Food & Drink

Belarus Food & Drink

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BMI View: The Belarusian food and drink market will suffer from the country's worsening economic situation as Belarus is expected to slide into recession in 2015. Falling real wage growth driven by high inflation will cap consumer spending, while collapsing demand from Russia and Ukraine will exacerbate Belarus' external imbalances and ensure that net exports remain a major drag on growth.

Headline Industry Data

  • Food consumption value (local currency) growth year-on-year (y-o-y) in 2015: +16.6%; compound annual growth rate (CAGR) 2014-2019: +19.1%.

  • Per capita food consumption value (local currency) growth (y-o-y) in 2015: +17.2%; CAGR 2014-2019: +19.7%.

  • Alcoholic...

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Medical Devices

Belarus Medical Devices

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BMI Industry View: The Belarusian medical device market is under-developed and heavily reliant on imports. Per capita device expenditure is one of the lowest in Europe at USD43. The outlook for the Belarusian medical device market is mixed, with robust growth projected in local currency terms, but due to the depreciation of the Belarusian ruble, the market is forecast to fall in value in US dollar terms. Measured in US dollars, the market is projected to fall at a CAGR of 0.9% over the 2013-2018 period.

Headline Industry Forecasts

  • In 2013, the medical device market was...

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Pharmaceuticals & Healthcare

Belarus Pharmaceuticals & Healthcare

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BMI View: Collapsing external trade will have a highly damaging impact on living standards in Belarus, impacting incomes, employment and consumer sentiment, and we expect the pharmaceutical sector to be hurt by these factors. We expect the Belarusian government to increase its focus on import substitution given its balance of payments crisis, with negative implications for the pharmaceutical sector.

Headline Expenditure Projections

Pharmaceuticals: BYR10,223bn in 2014 (USD998mn) to BYR12,355bn (USD887mn) in 2015; +20.9% in local currency terms and -11.1% in US dollar terms.

Healthcare: BYR47,583bn (USD4.64bn) in 2014 to BYR60,068bn (USD4.31bn) in 2015; +26.2% in local currency terms and -7.1% in US dollar terms.

Risk/Reward Index...

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Telecommunications

Belarus Telecommunications

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BMI View:  Belarus continues to exhibit signs of growth across its mobile, fixed, broadband and pay-TV markets, however, the industry remains underdeveloped compared to the rest of the region. This is due to the large involvement of the state in the market, from its stake in mobile operator MTS , its full ownership of fixed-line monopoly Beltelecom and through the creation of beCloud to deploy a wholesale national LTE network. Attempts to sell its stake in MTS have floundered again in 2014, as the price remains too high for the risky business environment. Demand for data services is evident in the market, with 3G uptake growing strongly, as well as moves to FTTH and IPTV. However, high inflation and...

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