Belarus May Avoid Recession by Relying on Exports, Zhabko Says

By Daryna Krasnolutska and Halia Pavliva

May 16 (Bloomberg) -- Belarus will probably avoid a recession this year as the country devalued its currency, making exports cheaper, Deputy Economy Ministry Petr Zhabko said.

"The economy will remain unchanged at least" said Zhabko in an interview in London late yesterday. "If the situation improves a bit in our main trade partners such as Russia, Ukraine and the European Union, our economy will expand 2 percent." The Belarusian economy grew 1.1 percent in the first quarter, he said.

Belarus, sandwiched between Russia and the EU, was forced to seek international aid as the global financial crisis took its toll on emerging economies by shriveling investments and cutting demand for their products. The former Soviet state was bailed out by the International Monetary Fund and Russia.

The country exports gas, electricity, timber and potash and its main trading partner is Russia. Still, the global recession eroded demand and its trade deficit more than doubled to $443.2 million in January.

Belarus plans to start selling electricity to Poland within three years, Alexander Sivak, chief executive officer of national utility Belenergo, said on March 11.

Belarus devalued its ruble, and pegged it to a basket made up of euros, dollars and Russian rubles in January. The Belarusian currency lost 21 percent versus the dollar since the beginning of the year, Bloomberg data show. Zhabko reiterated the country will keep the ruble within a 5 percent trading band against the basket.

'Security Pillow'

"Our republic attracted enough foreign currency resources for a security pillow, " said Zhabko. "If our trade partners' economy stagnates, we hope international financial organizations will help us."

Inflation was 6.5 percent in the first four months because the government raised utility costs for households as the price of Russian gas increased, said Zhabko. Still, the government expects inflation to stay below 11 percent this year, compared with 13.3 percent last year.

Zhabko expects Russia will raise gas prices for Belarus next year as well. He did not elaborate, adding that "the price will be manageable by the economy."

The Washington-based IMF, which approved a $2.5 billion loan to Belarus in January, expects the country's economy to contract 4.3 percent this year and inflation to be 12.6 percent.

Belarus plans to sell state companies this year, including its four biggest banks, said Zhabko. He declined to say how much the government wants to raise from assets sale, saying that "we will sell all enterprises for a real price."

Zhabko said that the parliament may pass a law on selling electricity producers and Belarus will start the sales then.



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