NBRB: no direct effect of global financial instability on Belarus’ economy

In 2007 the direct influence of the instability of global financial markets on Belarus’ economy was limited, says an analytic review “Financial stability in the Republic of Belarus in 2007” presented by the National Bank of the Republic of Belarus (NBRB). Member of the NBRB Board of Directors, Head of the Central Banking Supervision Department Sergei Dubkov told BelTA, due to the low integration of Belarus’ financing into the global financial system the last year’s downturn on the global financial markets did not result in essential influence on the existing conditions and the deficit financing structure of the current account of the country’s balance of international payments. But the country’s financial stability was largely influenced by changing global prices for raw materials, oil and petroleum products, natural gas as well as the demand for Belarus-made products in the country’s major trade partners, first of all, the Russian Federation. The analytic review says, in 2007 Belarus benefited from the favourable foreign market situation, which was caused by rapidly growing prices for energy resources and food. Belarus benefited a lot from higher prices for several most important commodities on foreign markets. The average export prices for oil went up by 28.5%, ferrous metals — 33.8%, trucks — 31.3%, timber — 47%, potash fertilisers — 21.2%, nitrogen fertilisers — 57%. The direct effect was brought about by the high demand for the commodities on foreign markets, allowing Belarusian enterprises to work at full capacity and thus to increase industrial output. The indirect effect was achieved through higher tax revenues and fees on foreign trade operations the state budget collected. Meanwhile, in 2007 the Belarusian economy was quite seriously shocked by worse terms of trade with Russia. It resulted in a major increase in prices for imported primary energy resources, changes of terms of oil import and petroleum products export, restrictions on some Belarusian exports to Russia in H1 2007. The major increase in prices for imported intermediary goods (127.1%, with prices for energy intermediary goods up by 143.1%, oil and gas — 110% and 134.6% respectively) as well higher customs duties on petroleum products contributed to larger outlays and a worse financial status of Belarusian companies in the industries, which were the main consumers of the energy resources. On the whole, according to the review Belarus’ domestic economic development was stable in 2007. Meanwhile, certain macroeconomic risks related to a higher deficit of the current balance and the joint foreign debt as well as a larger burden on the banking system were observed. The document is the first one in a series of financial stability reviews of the National Bank of the Republic of Belarus plans to make on an annual basis. Unlike NBRB regular publications, which are dedicated to trends in the economy and the money and credit sphere as well as the development of the banking industry and banking supervision, the financial stability reviews are focused on financial risks and will be the key NBRB papers to highlight the issues. The publications are supposed to present results of the analysis and monitoring of financial stability in Belarus the NBRB performs for the sake of detecting systematic risks and early prevention of systematic crisis phenomena in the financial industry. Financial stability reviews are supposed to contribute to the understanding of risks financial intermediaries face in the economic environment, warn financial institutions and market participants about possible general effects of single actions, reach an agreement concerning the financial stability and the improvement of the financial infrastructure.