By Jan Cienski in Minsk
The parking lots of Belarusian heavy truckmaker Belaz offer a hard-to-miss clue to how the ex-Soviet republic is tackling the downturn. They are packed with unsold bright yellow behemoths.
The reason for the enormous inventories is that the government - through the four largest state-controlled banks - has pumped cash into the state-owned enterprises that make up three-quarters of the economy.
Belarus and its neighbours
The International Monetary Fund foresees no contraction in Belarus this year, in contrast to the deep recessions taking place in neighbouring Ukraine and Russia. Keeping state enterprises afloat has preserved jobs - unemployment is officially only 1 per cent.
However, the policy could be storing up trouble for the banking system. Andrei Kobyakov, the country's deputy prime minister, says that the banking system's non-performing loans are only 4 per cent. But Standard & Poor's, the rating agency, says problem assets in the financial system could rise to as high as 35-50 per cent "in a reasonable worst-case scenario".
An overwhelmed banking system would have the potential to shake the regime of Alexander Lukashenko, the authoritarian president.
"What is happening now is a question of Lukashenko holding on to power," says Irina Tochitsky, deputy director of the IPM Research Centre, an economic policy think-tank. "His ratings are closely tied to people's view of the -economy."
Mr Lukashenko is trying to reform the economy and attract vital foreign investment without losing political control. Until 2007, Belarus was a very strong performer despite undertaking almost no economic reforms. But that year Russia tired of supporting its smaller neighbour and began to demand higher prices for oil and gas.
Pushed to the wall by Moscow, Mr Lukashenko began a tentative opening to the west, releasing political prisoners in the hope of attracting much-needed investments. He also undertook a series of economic reforms, reducing red tape, ending government price controls for most goods in shops and taking steps to privatise some state assets.
Belarus shot up the ranks in the World Bank's Doing Business survey. But since the onset of the global crisis, there have been no big privatisations, and little new foreign investment. Although Belarus announced on Friday it was considering its first eurobond issue - at least ?250m-300m - next year.
"There is a much lower risk appetite than two years ago: it's a more difficult environment for frontier markets," says Valdas Vitkauskas, head of the local office of the European Bank for Reconstruction and Development.
So the government has returned to the Soviet-era tradition of steering the economy by administrative fiat.
Mr Lukashenko decreed that businesses should produce at least 80 per cent of last year's production. "Any further drop is impossible," the president said while visiting a ball bearing plant.
But exports have fallen 50 per cent so state-owned companies such as Belaz have run up enormous inventories, which they are now frantically trying to sell off in markets beyond the former Soviet Union.
"Russia and Ukraine are priorities, but we are pushing hard to expand to foreign markets," says Vladislav Rudkovski, marketing director of Belaz.
Belarus received much-needed foreign help this year, in the form of a $2.5bn standby agreement with the International Monetary Fund in January, followed by another $1bn in June.
But a 20 per cent devaluation against the dollar earlier this year, and the prospects of slow growth next year, are challenging the generous welfare state built by Mr Lukashenko.
"It's hard to radically change direction without changing the leadership," says Pavel Daneyko, an economist with the non-government Belarusian Research Centre.