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COUNTRY REPORT Belarus Moldova 4th quarter 1997 The Economist Intelligence Unit 15 Regent Street, 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 subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; 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 Street 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: (44.171) 830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.171) 499 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 EIU Electronic Publishing New York: Lou Celi or Lisa Hennessey Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 London: Moya Veitch Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 This publication is available on the following electronic and other media: Online databases CD-ROM Microfilm FT Profile (UK) Knight-Ridder Information World Microfilms Publications (UK) Tel: (44.171) 825 8000 Inc (US) Tel: (44.171) 266 2202 DIALOG (US) SilverPlatter (US) Tel: (1.415) 254 7000 LEXIS-NEXIS (US) Tel: (1.800) 227 4908 M.A.I.D/Profound (UK) Tel: (44.171) 930 6900 Copyright © 1997 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 1 Contents 3 Summary Belarus 5 Political structure 6 Economic structure 7 Outlook for 1998-99 10 Review 10 The political scene 15 Economic policy 16 The economy 19 Foreign trade and payments 20 Business news Moldova 21 Political structure 22 Economic structure 23 Outlook for 1998-99 26 Review 26 The political scene 28 Economic policy 30 The economy 32 Foreign trade and payments 34 Business news 35 Quarterly indicators and trade data List of tables 10 Belarus: forecast summary 15 Belarus: state budget 17 Belarus: financial performance of state-owned enterprises 18 Belarus: consumer prices 26 Moldova: forecast summary 29 Moldova: government budget 30 Moldova: agricultural output 31 Moldova: consumer prices 33 Moldova: balance of payments, 1997 35 Belarus: quarterly indicators of economic activity 36 Moldova: quarterly indicators of economic activity 37 Belarus: OECD trade 38 Moldova: foreign trade 39 Former Soviet republics: currency status 40 Former Soviet republics: exchange rates EIU Country Report 4th quarter 1997 © The Economist Intelligence Unit Limited 1997 2 41 Former Soviet republics: GDP and GDP per head List of figures 10 Belarus: gross domestic product 18 Belarus: consumer prices 18 Belarus: exchange rate 26 Moldova: gross domestic product 31 Moldova: consumer prices 32 Moldova: stock exchange trade EIU Country Report 4th quarter 1997 © The Economist Intelligence Unit Limited 1997 3 November 21st 1997 Summary 4th quarter 1997 Belarus Outlook for 1998-99: An anti-terrorist edict issued by the president in re- sponse to the assassination of a close friend in Mogilev, poses further threats to the country’s democracy and civil liberties. Opposition to the president has grown to some extent, but mass support will be difficult to mobilise because of the stranglehold that Mr Lukashenka exerts over the media. The proposed Union Treaty with Russia will stall as a result of a waning Russian enthusiasm. More soft credits will be issued to keep the economy growing. Inflation will accelerate as a result. The political scene: Pavel Sheremet, a journalist working for the Russian TV station, ORT, was released in from prison in October following pressure from the Russian president, Boris Yeltsin. The assassination of Yevhenii Mikolutsky, the chairman of a local administrative structure in Mogilev and a personal friend of Mr Lukashenka, has prompted a new anti-terrorist edict and a clampdown on law and order. A number of prominent figures have been implicated by the government in an alleged corruption scandal involving a privatised agricultural company, Rasvyet, including the agriculture minister who has been dismissed from his post. Mr Lukashenka has backed a restrictive media law, despite opposition from the upper house of parliament. Opposition politicians, along with Mr Sheremet, have formed a new organisation modelled on a 1970s dissident movement in the former Czechoslovakia. Economic policy: The draft budget for 1998 has been formulated. The World Bank has delayed the implementation of an earlier agreement, and IMF credits remain suspended. The government has completed the distribution of privatis- ation vouchers, but there has been relatively little actual privatisation. Admin- istrative price rises have had little effect in curbing inflation. The economy: GDP continues to grow well, driven by a spectacular revival in industrial production, fuelled by cheap credits. Inflation continues to escalate, further weakening the currency. Wages are barely keeping pace with inflation, and unemployment remains low. Foreign trade and payments: The trade deficit exceeded $1bn in July, although this appears to have been offset on the current account by an in- creased surplus on the services balance, which includes barter trade. The government claims that foreign investment is rising. Business news: Mr Lukashenka has confirmed that tax exemptions for Ford Motor Company of the US would only apply for five years. Free economic zones in Minsk and Gomel have been approved. Moldova Outlook for 1998-99: The legislative election in February 1998 will once again produce a divided parliament. The pro-presidential Bloc for a Democratic and Prosperous Moldova should pick up support at the expense of the hard left and the divided centre-right. In the meantime, parliament will opt for populist economic policies. Relations with Russia will continue to improve, but this will EIU Country Report 4th quarter 1997 © The Economist Intelligence Unit Limited 1997 4 have little impact on the Transdniestr conflict, which remains at an impasse. With the budget deficit set to reach 7.5% of GDP, and the economic position still gloomy, Moldova will face problems with its future plans for accessing the Euromarkets, and there may be some pressure on the currency. Inflation will remain low and tentative economic growth will emerge in 1998. The political scene: Moldova’s political parties are consolidating into four major blocs for the 1998 elections. At the CIS summit in Chisinau Mr Yeltsin admitted Russian responsibility for the continuing crisis in Transdniestr. The breakaway region’s application to join the CIS, however, has been ignored, and there has been no progress towards a political resolution of the conflict. The sale by Moldova of 21 Russian MiGs to the US has caused uproar in the Mol- dovan parliament. Moldova and Ukraine are close to agreeing on the demarca- tion of their common border. Economic policy: Parliament has rejected the first draft of the 1998 budget as containing overoptimistic growth projections, and the 1997 budget deficit is growing. Parliament has also suspended administrative energy price rises and has removed penalties for non-payment of tax by companies. The IMF has suspended further credits, and the World Bank has also expressed concern about the deteriorating economic situation. Moldova is likely to have its inter- national credit rating downgraded. The economy: The harvest, although poor, is an improvement on 1996. Industrial production has started to rise. Inflation continues to fall. Unemploy- ment has risen marginally. Foreign trade and payments: The trade deficit exceeds $200m, but the current account deficit narrowed in the second quarter of 1997. Business news: The national telecoms monopoly, Moldtelecom, is expected to be sold shortly. Editor: Kitty Ussher All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 EIU Country Report 4th quarter 1997 © The Economist Intelligence Unit Limited 1997 Belarus 5 Belarus Political structure Official name Republic of Belarus Legal system The constitution adopted in March 1994 was amended by referendum in November 1996 to increase presidential powers and form a bicameral parliament National legislature Bicameral parliament (National Assembly): upper house, Council of the Republic, with 64 members; lower chamber, the House of Representatives, with 110 members National elections June