The presentation of new materials of the Belarus Economy Monitor
took place online on May 13, 2025.
We publish brief conclusions:
Belarus' GDP grew by 3.1% in Q1-2025 compared to Q1-2024, following an increase of 2.5% YoY in Q4-2024. This is significantly above the growth rate of potential GDP. As a result, the scale of economic overheating reached its highest level since mid-2014.
Domestic demand remained the key driver of GDP growth at the start of the year, including due to an increase in the contribution of investments. Consumer demand was supported by rising wages and credit availability. Investment activity was stimulated by the need to expand production capacity and increase labor productivity to maintain high output levels. Domestic demand growth significantly exceeded potential for production growth in Q1-2025, resulting in a sustained foreign trade deficit.
Labor shortages remained a serious issue in Q1-2025. The unemployment rate fell to around 2.7% of the labor force (seasonally adjusted), and real wages were ≈35% above the 2021 average.
Inflation accelerated due to excess demand pressure and rising labor costs. Inflation rose to around 7.3% in Q1-2025 (annualized quarterly price growth, seasonally adjusted). Despite the growth of inflation risks and economic imbalances, domestic economic policy remained stimulative in Q1-2025.
The economy is projected to expand by 2–3% this year, following 4% growth in 2024. Monetary conditions in 2025 will be more accommodative than previously forecast due to the National Bank's growing resistance to tightening policy. Fiscal policy is expected to remain accommodative. As a result, domestic demand will continue to rise in both consumer and investment segments. Exports will slow due to stronger competition and declining demand in the Russian market. In sectors where external demand remains high, output and exports growth will be constrained by limited production capacity in an environment of full capacity utilization. Stimulated domestic demand, in a constrained supply environment, will maintain significant economic overheating.
The large excess demand combined with falling exports will sustain a trade deficit and lead to higher inflation. The trade deficit is expected to be close to 2% of GDP in the medium term. Inflation will accelerate to 7–9% by the end of 2025.
Uncertainty has increased due to external risks and the National Bank’s shift toward pro-cyclical monetary policy. Accumulated imbalances in the economy have a high chance of causing turbulence. Current reserves are sufficient to mask these imbalances for a while, but this camouflage depends on favorable external conditions. In the event of a sharp weakening of the global or Russian economy, the probability of a reduction in output in Belarus, combined with a breakthrough in price pressure, is estimated to be high, and it has increased due to the National Bank’s refusal to pursue a stabilization monetary policy.