IMF raises Belarus 2018 growth forecast to 1.8 percent

MINSK: The International Monetary Fund has raised its forecast for Belarus's economic growth in 2018 to 1.8 percent from less then 1 percent and recommends the authorities speed up reforms, an IMF statement said on Tuesday.

The ex-Soviet republic received $3.5 billion from the Fund in 2009-2010, but the finance ministry called off talks about a new $3 billion loan this summer, saying emergency financing was not needed after the economy emerged from a two-year recession.

This year the IMF and Belarus expect economic growth of 1.7 percent, but opinions on the speed of growth next year differ, with the authorities seeing a 3.5 percent rise compared with the Fund's forecast of 1.8 percent.

"Achieving higher sustainable growth, greater export diversity, and reducing vulnerabilities will require more ambitious reforms," the IMF said in a concluding statement after a mission visited Minsk in November.

The IMF recommends the government accelerate reform of loss-making state-owned companies, reduce budgetary support for the real economy and raise utility tariffs.

"The authorities' more gradual pace of structural and institutional reforms risks leaving vulnerabilities to linger for too long, putting Belarus at risk of shocks and inviting pressures for reversals to the type of state involvement in resource allocation seen in the past," it said.

The Fund advised that the central bank pause its easing of monetary policy, which has included a gradual reduction of the main interest rate from 25 percent at the start of 2016 to the current level of 11 percent.

Inflation stands at 5.3 percent year-on-year compared with 10.6 percent this time last year. The Fund is forecasting inflation of 7 percent in 2018.

"Despite slowing inflation, staff recommends a pause in further reductions in the refinancing (policy) rate until there is better understanding of the implications of recent economic and policy developments affecting domestic demand," it said.

The Belarussian economy remains dominated by the state, but authoritarian President Alexander Lukashenko has introduced some reforms to improve the business climate and shore up the economy after GDP shrank 3.9 percent in 2015 and 2.6 percent in 2016.