President Lukashenko won a fifth term by a large majority. Even if the presidential election fell short of democratic standards according to the OSCE, there was no crackdown on opposition as was the case after the 2010 presidential election. As a result and following the release of six political prisoners in August – which was a long-held demand of the 28-nation bloc – the EU decided to suspend certain sanctions, including the travel ban and asset freeze, that were previously imposed on Lukashenko and his supporters (click here for more information). The US has also temporarily eased sanctions on several sanctioned entities. Recent events suggest that Belarus, a close Russian ally, is trying to improve its relation with the West.

Impact on country risk

The election was held in a challenging time for the heavily centralised economy. Indeed, the country is highly reliant on Russia which is its main trade partner, a key provider of external support and an important economic actor as for instance Russian banks account for around 25% of the banking sector assets and Russia is an important provider of FDI. As a result, the economy has been badly hit by the Russian economic crisis. The GDP is expected to contract by 3.6% this year and to further decrease by around 2% in 2016. The foreign exchange reserves were under severe pressure at the end of 2014 (cf. graph). In order to stem the decline of the foreign exchange reserves, the authorities decided to devalue the currency at the end of 2014. In January they introduced a new, more flexible exchange rate regime. However, the liquidity remains very precarious. As a result, Credendo Group is currently off cover for the ST risk on Belarus (as well as on MLT risk). Prospects to reopen depend on the liquidity situation.


Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com