Presentation of the Belarus Economy Monitor, August 2024. Summary

- The Belarusian economy accelerated growth in Q2-2024. The country's GDP increased by 5.5% compared to Q2-2023. In the context of labor shortages, such a high growth rate led to increased overheating of the economy. The external trade position weakened due to excess demand and a decrease in export prices. Economic activity is expected to slow down in the second half of the year, with GDP growth around 4% by the end of 2024.
- Inflation remained contained in Q2-2024 at 6.1% QoQ (annualized and seasonally adjusted). Price controls prevented the transfer of increased demand and labor market pressures into actual prices. The inflationary overhang continued to accumulate. With ongoing price regulation, inflation is expected to be between 5–7% by the end of 2024.
- Economic policy remained loose in Q2-2024, despite the increased overheating of the economy. Budget expenditures were growing at high rates. The National Bank responded very cautiously and somewhat inconsistently to increased inflation risks only in July, using auxiliary monetary policy tools. These measures will lead to higher market interest rates and bring them to neutral levels by the end of the year but will not make monetary conditions restrictive.
- The risks of lower GDP growth and higher inflation compared to the baseline scenario prevail in the medium term. Higher short-term economic growth without accumulating inflationary potential is possible if investments intensify and their efficiency is ensured.