Country Risk Rating

A high-risk political and economic situation and an often very difficult business environment can have a very significant impact on corporate payment behavior. Corporate default probability is very high. - Source: Coface

Business Climate Rating

The business environment is very difficult. Corporate financial information is rarely available and when available usually unreliable. The legal system makes debt collection very unpredictable. The institutional framework has very serious weaknesses. Intercompany transactions can thus be very difficult to manage in the highly risky environments rated D.


  • Well-developed transport network: bridgehead for China’s Silk Road, due to its favorable geographical location between Russia and Europe
  • Relatively well trained and skilled workforce
  • well-trainedtrial (31% of GDP in 2020) and agricultural (10% of GDP) sectors
  • Little inequality and poverty is rare



  • Harsh sanctions by the West on the country after it gave Ru the full support for its invasion of Ukraine
  • Very high political and economic (energy, trade, and financial) dependence on Russia
  • Low geographical and sectoral diversification of exports
  • Sensitive to the level of petroleum product prices (purchase price negotiated with Russia)
  • State plays a massive role in the economy (1/2 of total value added, 2/3 of total employment)
  • Poor governance (high corruption, weak legal system, institutional rigidity, absence of pluralism)
  • Monetary policy is not independent, the central bank reports directly to the President
  • Shrinking labor force


Current Trends

In the middle of the Russia-Ukraine conflict

The economic outlook for Belarus this year changed drastically after Russia invaded Ukraine, with the full support of Belarus, on 24 February. Russia used the Belarusian territory as a base to fire ballistic missiles and send air and ground troops. In addition, the Russian army is fully supported by the economic infrastructure and supply of Belarus. The U.S. and the U.K. (Belarus' TOP 11 and TOP 5 export partners, respectively) reacted to this via sanctions targeting 24 individuals and entities and two state-own banks. The E.U. (TOP 2 export partner, receiving 19.3% of all Belarusian exports) went further and targeted 42 individuals (freezing their assets and implementing a travel ban) but also restricted the trade of machines in the tobacco industry, mineral fuels, as well as potash to producer fertilizers, wood, and cement products. Furthermore, exports of iron and steel products are affected, as well as rubber products, dual-use goods, and technology that could be used for military and security purposes. In total, 70% of all exports to the E.U. are affected by this new trade ban, with 702 individuals and 53 entities under sanctions. Due to the reputational damage of Belarus, other countries could follow soon. In addition, the trade with Ukraine – which represents 11% of all goods exports - broke down completely because the National Bank of Ukraine prohibited any foreign currency trade in Belarusian Ruble.


Russia, the most important trade partner, accounting for 45% of all Belarusian exports and 50% of all imports, will increase its support but needs to balance out the sanctions from the West fully. Public consumption (57% of GDP) will deteriorate this year as inflation should be surging now that energy prices have shot up due to the military conflict and will cut the purchasing power of the people. This will hit the Belarusian population hard as the fall in the number of employees in the wake of the pandemic has not been recouped and even worsened due to political turmoil in 2021. Besides that, private investments (22% of GDP), domestic and especially foreign investors (except Russian ones), will be scared away by the military conflict. The central bank of Belarus had raised its key interest rate by 150 basis points to 9.25% in 2021 and decided on an additional rate hike of 275 basis points in late February 2022 up to 12% in reaction to the extreme devaluation of the Belarusian Ruble (20% within a few days in February against the euro and USD). Further increases in the key interest rate to stabilize the Ruble are expected in the near term.


Public and external accounts now entirely rely on Russia

Before 2019, Belarus imported Russian oil at a subsidized price, refined it, and sold it at a higher global market price. This was the primary source of public funding. Since 2019, Russia has changed its customs duties and tax system for oil, so Belarus could not profit from this Russian "tax maneuver" anymore. However, in 2021, Russia and Belarus negotiated to minimize this loss starting in January 2022. Together with reduced COVID-19-related expenditures, this should reduce the public deficit, but it will not stop the public debt from increasing. More than 90% of this debt is denominated in foreign currency. External debt (70% of GDP) is equally divided between the State and companies, and Russia holds 81%. The current account balance will sharply turn into a deficit as the sanctions from the West kick in on the goods trade side and the balance of direct investments. 


Belarus cuts the last string to the West

The relationship between Belarus and the West was already shallow at the end of 2021. President Alexander Lukashenko was re-elected at the general election in August 2020, which was seen as unfree, and the ballot was marred by massive fraud. The violent reaction of Lukashenko's regime against the demonstrators led the E.U., the U.S., the U.K., and Canada to impose a first round of sanctions. In May 2021, the Belarusian air traffic control ordered an Irish plane flying from Greece to Lithuania to make an emergency landing in Belarus to arrest a Belarusian opposition journalist. This led to further and stricter sanctions from the West. In retaliation, Lukashenko orchestrated a migrant crisis by luring migrants from Afghanistan, Iraq, and Syria, letting them fly into Belarus and then pushing them towards the E.U. borders. Latvia, Lithuania, and Poland closed their borders, leaving migrants in the middle without any perspective. This again led to further sanctions. Russian President Putin prevented a further escalation of this situation at that moment. Due to Lukashenko's extremely high political dependence on Moscow, Belarus had to enter the war as a de-facto satellite country of Russia. 


Coface (03/2022)