No wage growth ahead: Experts warn Russian crisis is spilling into Belarus

The January result spoils the plans of officials who forecast that in 2026 the economy will grow by 2.8%.

 

Industry falls, warehouses fill up

 

Author and host of the program "Optimum" on the channel "Belarusians and the Market," Andrei Makhouski, notes in a conversation with "Belsat" that the economy fell in the first month of the year mainly due to industry, where production began to decline last year. Indeed, the decrease in this area amounted to 3.4% compared to January 2025.

 

"The industrial decline would have been even greater if not for the cold weather, as more electricity and heat needed to be used. In manufacturing, the drop was 7.5%. That's really a lot.

 

Even in the mining industry, which was growing a little at the end of the year, a decline is observed. This means that things are not entirely good with potash fertilizers, despite the lifting of US sanctions. The production of potash fertilizers has clearly decreased, as this is the main component of the mining industry," says Andrei Makhouski.

The interlocutor notes that the decline in industry was predicted by experts and is largely connected with Russia.

 

"The same trends that were at the end of the year are now at work. That is, the Russian market is shrinking – there's nowhere to sell. I would also draw attention to the fact that simultaneously with the reduction in production volumes, warehouse inventories have still grown even more. Now they are almost ninety percent of monthly production volumes. This is an historical record, at least as far as I remember," notes Makhouski.

 

Alyaksandr Lukashenka also drew attention to this problem at a meeting with officials on February 17. According to him, in January alone, warehouse inventories increased by 800 million rubles (approximately $278 million USD) and reached 12 billion rubles (approximately $4.17 billion USD) .

 

Editor-in-chief of the media "Plan B," Volha Loika, tells "Belsat" that this is a lot, even more than during the COVID times.

 

"Our sales problems are not temporary, but systemic. We can't say that at the beginning of the month there were long weekends in Russia, so we just didn't deliver something and it's all gradually on its way. It's not going anywhere. It's already produced, wages have been paid, raw materials and utilities have been paid for, costs have been incurred, but nothing has been sold. And if the product isn't sold immediately, the question arises whether it will be sold at all," says Volha Loika.

 

She recommends that officials think about why fulfilling the production plan turned out to be more important than the state of enterprises, which led to overflowing warehouses.

 

Even where there is growth, not all is well

Agricultural production in January grew by 3.5% in comparable prices, but there are problems here too. Lukashenka also acknowledged them. Firstly, livestock mortality continues, and secondly, agricultural enterprises are in huge debt.

 

"Yes, we earn decently, but state support alone for compensation of losses amounted to 2.1 billion Belarusian rubles (approximately $730 million USD) ," Lukashenka said, commenting on the situation last year.

 

"That is, growth in agriculture occurs because it is simply being pumped with money," emphasizes Andrei Makhouski.

 

Also in January, there was growth in retail turnover – 1.2%. This is the result of the fact that real incomes of the population are still growing, the interlocutor notes.

 

At the same time, people went to cafes and restaurants less – public catering turnover decreased by 3.1%. Perhaps this is due to the cold – people simply didn't go out unnecessarily.

 

"This is just one month. I wouldn't make far-reaching conclusions that this is connected, for example, with a decrease in income. Maybe it really is connected with the cold. Although in Russia – and we follow Russia, just lagging a bit behind it – in December there was a record closure of bars and restaurants in Moscow. There, everyone is definitely saying that this is a sign of the coming crisis. When people earn less, they go to restaurants and bars less," says Andrei Makhouski.

No wage growth?

 

According to Makhouski, the Belarusian economy faces difficult times, and the January decline is just the beginning.

 

"We are completely dependent on the Russian economy, and the crisis in the Russian economy is just beginning. And this is a general consensus, both among independent economists and pro-government economists," the expert continues.

 

Even Russian Economy Minister Maxim Reshetnikov stated that the Russian economy is facing a downturn that will last until the end of 2026.

 

"Belarus will also be affected by Russian problems. What should Belarusians expect? Lukashenka gave a hint at today's meeting. He said that Belarusians' incomes are growing too fast, while the whole economy is growing weakly – we need to balance it somehow so that incomes and the economy grow equally. Most likely, we should expect that, at a minimum, we will not have the income growth we've seen in the last two years," says Andrei Makhouski.

 

He notes that wages have indeed grown unjustifiably.

 

"If your economy is growing by one percent, and wages by ten percent, it's obvious that this is unjustified wage growth. This was due to the fact that Belarus lacks people to work," the interlocutor emphasizes.

 

That is, wages grew because employers needed to somehow attract workers and retain them. But this cannot continue indefinitely.

 

"Therefore, there will be no wage growth, and there may even be a decrease. Because if your economy is shrinking, if you produce less, sell less, then you have nowhere to get the money for these wages. On the one hand, this will of course allow some kind of balance to be created, but on the other hand, we remember that Belarus still lacks people," says Andrei Makhouski.

 

He fears that a situation where people are not offered good wages will lead to even more economic migration from Belarus.