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COUNTRY REPORT Belarus Moldova The full publishing schedule for Country Reports is now available on our web site at http://www.eiu.com/schedule. 3rd quarter 1999 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 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 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 EIU Electronic New York: Lou Celi or Lisa Hennessey Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 London: Jeremy Eagle Tel: (44.20) 7830 1183 Fax: (44.20) 7830 1023 This publication is available on the following electronic and other media: Online databases NewsEdge Corporation (US) Microfilm FT Profile (UK) Tel: (1.718) 229 3000 World Microfilms Publications Tel: (44.20) 7825 8000 (UK) DIALOG (US) CD-ROM Tel: (44.20) 7266 2202 Tel: (1.415) 254 7000 The Dialog Corporation (US) LEXIS-NEXIS (US) SilverPlatter (US) Tel: (1.800) 227 4908 M.A.I.D/Profound (UK) Tel: (44.20) 7930 6900 Copyright © 1999 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 1999-2000 10 Review 10 The political scene 12 Economic policy 14 The economy 17 Foreign trade and payments Moldova 20 Political structure 21 Economic structure 22 Outlook for 1999-2000 26 Review 26 The political scene 29 Economic policy 33 The economy 34 Foreign trade and payments 38 Quarterly indicators and trade data List of tables 9 Belarus: forecast summary 15 Belarus: consumer prices 16 Belarus: exchange rate 17 Belarus: monthly wages and pensions 17 Belarus: foreign trade, Jan-Mar 1999 18 Belarus: current account 26 Moldova: forecast summary 34 Moldova: consumer prices 36 Moldova: balance of payments 38 Belarus: quarterly indicators of economic activity 39 Moldova: quarterly indicators of economic activity 40 Belarus: OECD trade 41 Moldova: foreign trade EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 2 41 Moldova: structure of trade 42 Moldova: direction of trade 42 Former Soviet republics: exchange rates per $ 43 Former Soviet republics: GDP and GDP per head List of figures 9 Belarus: gross domestic product 13 Belarus: money supply and consumer prices 15 Belarus: inflation 16 Belarus: exchange rate 16 Belarus: wages and pensions 17 Belarus: foreign trade 26 Moldova: gross domestic product 29 Moldova: National Bank credit 35 Moldova: exports 36 Moldova: imports EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 3 September 1st 1999 Summary 3rd quarter 1999 Belarus Outlook for 1999-2000: The president, Alyaksandar Lukashenka, will benefit from the opposition’s marginalisation and remain in office until the end of the forecast period. Relations with the West will not improve significantly, while unification with Russia will remain on hold. The administration is unlikely to introduce economic stabilisation measures or dismantle Soviet-style economic controls. As a result, average annual inflation will remain in triple digits, while agricultural output will decline further. Although industrial production will continue to grow, GDP will stagnate this year and grow only slowly in 2000. The political scene: Mr Lukashenka remains in office despite protests by the opposition and criticism from multilateral organisations. The opposition is in disarray and faces ongoing intimidation from the authorities. Frustrated by the slow pace of unification with Russia, Mr Lukashenka has toned down his anti- Western rhetoric, although his foreign policy remains unchanged. Economic policy: Although the budget is generally sound, monetary and credit policies remain recklessly expansionist. Government control over prices and wages continues, as do strict foreign-exchange controls. The chairman of the central bank has promised full currency convertibility by 2000, which seems implausible. The IMF has turned down Belarus’s request for an emergency loan. The economy: GDP has continued to grow, albeit slowly. Although industry has fared reasonably well, the agricultural sector’s performance has been dismal. The currency’s nominal decline has slowed, but inflation remains high. Official unemployment figures are deceptively low. Foreign trade and payments: Despite an increase in non-CIS exports, export revenue remains dependent on Russia and has therefore fallen from last year’s levels. Import expenditure has dropped even further, resulting in a current-account surplus in the first quarter of 1999. Barter still figures prominently in Belarus’s trade. Moldova Outlook for 1999-2000: President Petru Lucinschi’s attempt to institute a presidential system will be constrained by international pressure and parliamentary opposition. There are few prospects for an early resolution to the crisis over the status of the breakaway region of Transdniestr. There is a risk that the government will collapse, owing to its slim majority. Structural reforms will accelerate as long as further political crisis is avoided. The economy will remain in decline. Average inflation will reach more than 35% this year, before falling to under 25% next year. The current-account deficit will narrow considerably. The political scene: The ruling Alliance for Democracy and Reforms coalition has in effect fallen apart. However, the centre-right’s desire to avoid an early election has ensured the minimum cohesion needed to remain in EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 4 power. Parliament has opposed the presidential commission’s draft proposals for a move to a presidential system. The Kiev summit on the status of Transdniestr has not resulted in any major breakthrough. Economic policy: The World Bank has approved $51m in loans, while the IMF has disbursed $34m. The government has reiterated its intention to keep the budget deficit at 3% of GDP and tighten monetary policy further. Continued progress on land reform has privatised smallholdings for more than 215,000 farmers. Energy and telecommunications privatisations are moving ahead. The central bank continues to allow the currency to float freely. The economy: In the first quarter of 1999 GDP fell by 7.8% in year-on-year terms, mostly owing to a steep fall in industrial output. Year-on-year inflation had reached 43% by June. The currency has stabilised and even appreciated slightly in nominal terms. Foreign trade and payments: Both export revenue and import expenditure have plummeted this year, as a result of the collapse of CIS markets. This severe contraction in trade has permitted a considerable reduction in the current- account deficit. Moldova has avoided a default on its Eurobond, but remains in arrears on its bilateral Russian debt. Editor: Stuart Hensel All queries: Tel: (44.20) 7830 1007 Fax: (44.20) 7830 1023 Next report: Our next Country Report will be published in December EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 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 power 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 23rd and July 10th 1994 (presidential); May 14th and 28th, November 29th and December 10th 1995 (legislative); next presidential election due in 2001; the date of the next legislative election to be decided by the president Head of state President, Alyaksandar Lukashenka, elected with 80% of the popular vote on July 10th 1994 National government The president appoints the Council of Ministers and has strong executive