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Belarus Moldova COUNTRY REPORT Belarus Moldova June 2000 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising conferences and roundtables. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.20) 7499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: http://www.eiu.com Electronic delivery This publication can be viewed by subscribing online at http://store.eiu.com/brdes.html Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, on-line databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office London: Jan Frost Tel: (44.20) 7830 1183 Fax: (44.20) 7830 1023 New York: Alexander Bateman Tel: (1.212) 554 0643 Fax: (1.212) 586 1181 Hong Kong: Amy Ha Tel: (852) 2802 7288/2585 3888 Fax: (852) 2802 7720/7638 Copyright © 2000 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 1356-4137 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Contents 3 Summary Belarus 5 Political structure 6 Economic structure 6 Annual indicators 7 Quarterly indicators 8 Outlook for 2000-01 8 Political forecast 9 Economic policy outlook 10 Economic forecast 12 The political scene 16 Economic policy 18 The domestic economy 20 Foreign trade and payments Moldova 22 Political structure 23 Economic structure 23 Annual indicators 24 Quarterly indicators 25 Outlook for 2000-01 25 Political forecast 27 Economic policy outlook 27 Economic forecast 30 The political scene 33 Economic policy 36 The domestic economy 39 Foreign trade and payments List of tables 10 Belarus: forecast summary 11 Belarus: international assumptions summary 18 Belarus: consumer prices 19 Belarus: exchange rate 20 Belarus: merchandise trade, 1999 21 Belarus: current account 28 Moldova: international assumptions summary EIU Country Report June 2000 © The Economist Intelligence Unit Limited 2000 2 28 Moldova: forecast summary 37 Moldova: consumer prices 37 Moldova: exchange rate 38 Moldova: wages 39 Moldova: balance of payments 40 Moldova: trade, Jan-Feb 2000 41 Moldova: composition of trade, Jan-Feb List of figures 11 Belarus: gross domestic product 18 Belarus: money supply and inflation 19 Belarus: real exchange-rate index 20 Belarus: foreign trade 28 Moldova: gross domestic product 37 Moldova: exchange rate 40 Moldova: composition of imports 40 Moldova: composition of exports 40 Moldova: trade EIU Country Report June2000 © The Economist Intelligence Unit Limited 2000 3 June 6th 2000 Summary June 2000 Belarus Outlook for 2000-01 The president, Alyaksandar Lukashenka, will maintain tight control over all aspects of policy formulation. The parliamentary election in October 2000 will bring few changes to the political landscape. The opposition will consolidate further, but not sufficiently to challenge Mr Lukashenka in the presidential election expected in 2001. The state will maintain direct control over the economy and resist restructuring collective farms and obsolete industrial enterprises. Real GDP growth will remain around 2-3% and will depend on continued Russian demand. The agricultural sector will remain in crisis. The administration’s commitment to low unemployment and high growth will lead to year-end inflation of between 150% and 175%, checked only by price controls and occasional, half-hearted attempts to tighten money supply and credit availability. Russia will dictate (and slow) the pace of further union between the two states. The political scene Mr Lukashenka has confirmed his dominance of the government bureaucracy by dismissing or reprimanding senior ministers. Meaningful dialogue between the government and main opposition parties has yet to materialise, mostly because of Mr Lukashenka’s inflexibility. The new electoral code falls short of international standards. The opposition has shown greater unity in staging impressive street protests, which drew harsh responses from security forces. Economic policy Mr Lukashenka has vowed to curb inflation through further resort to price and wage controls. Despite promises of policy tightening by the central bank, the IMF remains unimpressed. The government has increased mandatory currency sale requirements, but pledges to unify the exchange rate in 2000, which is unlikely to prove successful. The new presidential decree on land ownership is highly restrictive. Mr Lukashenka intends to preserve collective farming as the mainstay of Belarus’s agriculture. The domestic economy A strong increase in industrial output has compensated for continued decline in the agricultural sector, leading to 5% year-on-year GDP growth in January- April. Monthly inflation has slowed, but continues to average above 5%. The Belarusian rubel continues to soften. Foreign trade and Trade turnover with Russia is sharply up in year-on-year terms. The trade payments deficit has widened. Foreign direct investment remains low. EIU Country Report June 2000 © The Economist Intelligence Unit Limited 2000 4 Moldova Outlook for 2000-01 The government’s weak support in parliament and the uncertainties surrounding the debate over constitutional amendments bring a high risk of further governmental instability and an early parliamentary election. The pres- ident, Petru Lucinschi, is likely to win re-election in the presidential election in 2000, despite recent signs of consolidation among centre-right political parties. The political conflict over the status of Transdniestr will remain unresolved. Real GDP will grow by a modest 1% in 2000, assuming that the negative effects of the drought and frost earlier this year can be somewhat contained, and by 2% in 2001. Despite greater currency stability, the EIU expects some loosening of monetary policy, in response to the government’s revenue shortfalls, to bring somewhat higher inflation by the end of 2000. The current-account deficit will widen as import growth outstrips that of exports, but will remain below 1998 levels. The political scene Parliament’s failure to back legislation privatising wine and tobacco enterprises has underlined the government’s lack of parliamentary support. Centre-right parties have proposed an electoral coalition in advance of the presidential election—although this falls short of the political party consolidation needed for greater stability. The joint constitutional commission has emerged with a compromise between those favouring constitutional amendments to increase presidential powers, and those seeking to limit it. A meeting between Mr Lucinschi and the Transdniestrian leader, Igor Smirnov, achieved no results in solving differences over the political status of the breakaway region. Economic policy Parliament has rejected crucial bills to privatise the wine and tobacco industries, leading the IMF and World Bank to freeze further lending. The loss of privatisation revenue and multilateral inflows will force revisions to the 2000 budget. There have been further electricity cuts by Romania. Progress continues towards privatisation of the remainder of the electricity sector. The domestic economy Industrial production in the first quarter of 2000 rose sharply, pointing to an economic recovery. Sudden frosts in May and low rainfall threaten to cut production of many important crops, including grapes. Inflation as of April 2000 was down slightly at 39% year on year. The currency has remained relatively stable. Wage and pension arrears have been reduced, but unemployment benefit arrears are rising, as is joblessness. Foreign trade and Trade recovered somewhat in the first quarter of 2000, but faster growth in import payments expenditure has more than doubled the trade deficit in year-on-year terms. The current-account deficit fell to 2% of GDP in 1999 from 20% a year earlier. Parliament has approved a securitisation package for part of Moldova’s gas debt. Public external debt as of the end of March 2000 totalled just under US$1bn. Editor: Stuart Hensel Editorial
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