Belarus is basking in the glow of the flourishing Russian economy that has lifted growth, but for how long?

Official sources from Belarus and Russia claim that their economies have adapted well to the challenging conditions imposed by Western sanctions, boasting impressive growth figures in both of their economies.

Russia’s economy is booming and recently overtook Japan to become the world’s fourth largest economy in the world in PPP (purchase power parity) adjusted terms. Russia put in a surprising 3.6% growth last year and is on course to grow by 3.5-4% this year, according to the latest Central Bank of Russia (CBR) macroeconomic survey.

Joined at the hip, Russia’s strong performance has lifted Belarus economic performance in a similar way. However, with signs that the Russian economy is cooling and in a pessimistic medium-term forecast, released in August, the CBR predicted that growth will peter out in the next few years, starting in 2025, and could drag Belarus down with it.

According to data from Belstat, the country's GDP grew by 5.5% from January to July 2024, building on a 3.9% increase in 2023. This marks a significant rebound from the 4.7% contraction experienced in 2022. Meanwhile, the Russian economy is reportedly growing at a similar pace, with President Vladimir Putin estimating a 5% increase in GDP for the first half of the year, following the 3.6% rise in 2023.

Trade between Belarus and Russia also continues to thrive, with turnover reaching $25.1bn in the first half of 2024 – a 6.4% increase from the previous year. Belarusian exports to Russia saw a modest 0.4% rise to $12.6bn, contributing to a positive trade balance of $100mn.

Belarus’s good performance is almost entirely dependent on external drivers, according to Belstat. The first challenge stems from increased competition within the Russian market, particularly following the exit of Western suppliers. While this should theoretically encourage Belarusian manufacturers to innovate and produce more competitive goods, the reality has been somewhat different. Belarusian producers, especially in the crucial dairy sector, have responded by raising prices, a move that some analysts suggest is inflating GDP figures rather than reflecting genuine economic strength. As one economist quipped, "give me inflation, and I’ll give you GDP growth," Belarus in Focus reported.

The second challenge relates to ongoing Western sanctions. Although Belstat deputy chairman Timofei Zhigarev claims that Belarusian businesses have adapted quickly, successfully trading with 157 countries worldwide, the underlying reality is a growing and potentially dangerous dependence on Russia. Analysts warn that this dependency, now covering up to 90% of Belarus’s exports, makes the Belarusian economy highly vulnerable to fluctuations in the Russian market. "Even the term 'total dependence' does not fully capture the situation," analyst Dmitry Kruk told Belarus in Focus.

Looking ahead, the Belarusian government remains optimistic. The Ministry of Economy forecasts that Belarus’s GDP will outpace global growth in 2025, projecting a 4.1% increase, up from 4.0% this year. Other experts are more sceptical, noting the lack of sustainable growth drivers such as technological innovation, demographic expansion, or significant investment. They argue that the current growth is unstable, driven more by political necessity – 2025 is an election year – than by sound economic fundamentals.

Independent economists also caution against the risks of an overheating economy. Like Russia, Belarus suffers from inflationary pressures, the volatility of the Russian ruble, and the long-term costs of wage increases. The International Monetary Fund (IMF), which recently upgraded its forecast for the Belarusian economy to 2.4% growth in 2024, predicts stagnation for the country over the next five years.