The decomposition of economic growth in Belarus

In the 2000s Belarus was one of the leaders of economic growth among the countries of Central and Eastern Europe.

This paper examines the factors of economic growth for the period 2006 to 2012: the results of this study suggest that the growth in Belarus was mainly due to capital accumulation. Furthermore, the growth of total factor productivity (TFP) was, in addition, extremely low. Such growth was not sustainable and its attenuation was expected. The problem, the paper suggests, of a production deficit embraces all industries and is systemic. Moreover, the inefficient allocation of capital between industries is an obstacle to productivity growth: by improving the quality of distribution the country can improve a one-time increase in output from 5% to 10%. Based on international comparisons, as the paper explains, industries producing "non-tradable" goods and the rental industries have the greatest comparative advantages. However, the industries most engaged to foreign trade remain outsiders in respect to the levels of relative productivity. This fact remains the key factor of a continuing external deficit. Comparisons of TFP in Belarus with the Czech Republic and Sweden showed that the comparative advantages of Belarus are concentrated in the natural-resource based industries, and the TFP gap with the Czech Republic was not decreasing over time.