BMI View: We expect to see significant growth in food consumption in Belarus (in rubles) over 2014 and continuing over our forecast period to 2017. However, this expansion will not be driven by increased economic activity, with real GDP growth per capita (in US dollar terms) forecast to contract by 2.8% and 1.5% in 2014 and 2015. Rather, the growth will be fuelled by price increases, with inflation expected to increase 17.5% in both 2014 and 2015 at a compound annual growth rate of 22.7% through to 2017. In 2010, however, this growth is coming from a very low base; based on 2010 figures, Belarus had the ninth lowest GDP per capita of all sovereign nations in Europe, and we consider it a risky market due to its political isolation from much of Europe and the high level of government intervention in economic matters. The country's high level of inflation over the past few years, which we expect to continue while gradually decreasing, is a further concern, particularly for consumer goods sectors.
Headline Industry Data (local currency)
- 2014 food consumption value growth = +17.12% year-on-year (y-o-y); forecast compound annual growth rate (CAGR) to 2017 = +15.88%.
- 2014 per capita food consumption value growth = +17.74% y-o-y; forecast CAGR to 2017 = +16.47%.
- 2014 wine value sales growth = +19.19% y-o-y; forecast CAGR to 2017 = +16.63%.
- 2014 functional soft drinks value sales growth = +18.64% y-o-y; forecast CAGR to 2017 = +15.82%.
Key Company Trends
- According to BelTA reports from June 2013, the government of Belarus will issue loans of around BYR400bn to various agricultural companies, as per resolution no. 445 of the Council of Ministers. The loans, to be provided through OAO Belagroprombank, will reportedly be paid out in the June- September 2013 period in order to support companies involved in farming and harvesting, processing, and equipment and maintenance.
- In August 2013, Belarus imposed temporary restrictions on all dairy products produced by Fonterra in the wake of the firm's botulism scare. The move came after Fonterra announced that a protein concentrate produced for infant formula and animal feed might be infected with the Colstridium botulinum bacteria. Fonterra exports US$133mn of dairy goods to Belarus, Russia and Kazakhstan.
Key Risks To Outlook
If the current trend of declining consumer price inflation is negated by overly loose monetary policy, we could see a return to very high levels of inflation, with resultant downside risks to our growth forecasts. Consumer price inflation increased by 66.85% in 2012 and by 20% in 2013; we are forecasting a moderate decrease to 17.5% in 2014. The government will be keen to avoid this scenario given the increase in social unrest caused by the last inflationary spike. Therefore, we expect it to keep to the current pace of refinancing rate cuts, with the rate reduced by a cumulative 500 basis points since the start of 2013, to 23.50%.