OREANDA-NEWS. The World Bank (WB) has downgraded Belarus' GDP growth forecast: Belarus' GDP is expected to reduce by 0.5% in 2014. Originally, the WB projected a 1.5% growth of Belarus' GDP this year. The WB made a statement to this effect in its latest review of Belarus' economic development.

“The economic outlook for Belarus remains challenging with economic growth expected to decelerate further during 2014. We project a shallow contraction of -0.5% for 2014 due to the continued weakness of the Russian economy and the need for domestic demand adjustment to correct existing imbalances.

The WB expects inflation to reach 16.4% by the end of 2014, if planned tariff increases are implemented and the exchange rate continues to adjust.

“The slowdown will dampen fiscal revenues and while there is a strong record of prudent management of the headline fiscal deficit, a small budget deficit is projected to emerge this year.”

The WB expects the current account deficit to narrow to 8.4% of GDP.

“Over the medium term, we expect a timid recovery in growth, driven largely by improved external conditions with Russia expected to resume higher growth during 2015 and 2016.”

The WB projects Belarus' real GDP growth to reach 1.5% in 2015 and 1% in 2016. Inflation is expected to grow by 16.5% in 2015 and 15.9% in 2016.

“For 2015, we assume some loosening of macroeconomic policies ahead of the elections. However, despite this we anticipate external imbalances to persist, unless decisive reforms are undertaken quickly to address the structural roots of declining competitiveness of the Belarusian economy.”

“On the domestic front, intensifying pressures ahead of the 2015 elections may make it more difficult for the authorities to pursue stabilization-oriented macroeconomic policies. While looser macroeconomic policies - especially high wage and credit growth - would increase growth, they will amplify existing imbalances and require a sharper and more painful adjustment similar to that during the 2010-2011 crisis. On the external front, heightened political risks associated with ongoing tensions between Russia and Ukraine could weigh on the Belarusian economy through its impact on Russian economy.”

According to the National Statistics Committee (Belstat), Belarus' gross domestic product (GDP) reduced by 1.6% on the year in January-February 2014 to Br94.899 trillion. The government expects Belarus' economy to expand by 3.3% in 2014, with inflation growth projected at 11%.