Belarus

Growth restricted by Western sanctions

Despite the lack of comprehensive economic data, growth is expected to remain strangled in 2026 and 2027. The economy continues to be heavily affected by Western sanctions which weigh on trade, investment, and access to foreign technologies. The European Union has rolled out a broad set of measures against Belarus aimed at punishing both human rights violations and its support for Russia’s aggression against Ukraine. These include asset freezes and travel bans targeting numerous officials and entities associated with the regime, as well as embargoes on arms, repression equipment, and sensitive dual-use technologies. These sanctions have been significantly intensified since 2022 by financial restrictions (affecting banks and access to SWIFT), trade limitations (covering key sectors such as potash, timber, steel, and hydrocarbons), and restrictions on services (including consulting, IT and engineering). They also include transport bans (air and road) and anti-circumvention measures. The overall objective is to reduce the regime’s economic resources, limit its industrial and military capabilities and increase political pressure in response to domestic repression and its support for Russia.

Activity will remain highly dependent on Russia, by far the country’s main trading partner (70% of trade), financial partner (50% of public debt), and energy supplier (99% of gas and 90% of oil). Russia will continue to finance the development of new industrial capabilities and the expansion of existing facilities in several strategic manufacturing sectors (automotive, agricultural machinery, chemicals), thereby supporting the import substitution programme implemented by the authorities. However, the slowdown in the Russian economy, which is expected to occur in 2026 and 2027, will directly weigh on Belarusian growth through exports.

Private consumption (70% of GDP) will remain the main driver of activity, supported by a still very favourable labour market characterized by a historically low unemployment rate (2.3% in March 2026) and strong nominal wage growth (+12.5% year-on-year in April 2026), particularly in the public sector, which has a predominant share of the economy. Pension increases (+10% in February 2026) will also continue to support household purchasing power. Inflation eased at the beginning of the year (5.5% year-on-year in April 2026), thanks to slower food price growth, but is expected to accelerate again on back of rising import costs and higher energy prices resulting from the conflict in the Middle East. To address these pressures, the authorities raised their inflation target to 7% for 2026, compared with 5% in 2025. Private investment will continue to be severely hampered by both strong state intervention and an unattractive business environment marked by widespread corruption. Credit allocation will remain directed and a neutral monetary policy favoured by the executive will be maintained. Foreign direct investment is expected to stay at historically low levels, i.e., around 50% below the levels observed before the war, thereby limiting productivity gains and the modernisation of the production apparatus. In this context, the government’s growth target of 2.8% for 2026 appears difficult to achieve and actual growth is likely to fall well below this level.

The twin deficits will continue to be financed by Russia

Visibility on public finances has remained limited since the suspension of official budget document publications in 2022, which have been replaced by sporadic and sometimes contradictory statements from the Ministry of Finance. Nevertheless, the budget deficit is expected to persist in 2026 and 2027. The 2026 budget projects a 12.4% increase in revenues, mainly driven by taxes targeting specific sectors (primarily energy and agriculture) and higher taxation on gambling, while the tax burden for most households remains unchanged. However, these additional revenues are likely to be insufficient to offset high spending on public sector wages, pensions, social benefits, and support for state-owned enterprises affected by Western sanctions. Moreover, although no significant increase in military spending has been officially recorded in the budget, the deepening of military cooperation with Russia suggests the existence of additional off-budget expenditures, which could further widen the deficit.

The current account, like its trade component, is also expected to remain in deficit in 2026 and 2027. The weakness of the Belarusian ruble (despite an appreciation since 2025) will continue to weigh on external trade. In response to Western sanctions, Belarus has accelerated the reorientation of its trade toward Russia, which now absorbs more than half of the country’s exports and supplies nearly three-quarters of its imports. This growing dependence reduces the diversification of external outlets and increases vulnerability to a slowdown in Russian activity. Exports of refined petroleum products and other goods, whether or not destined for Russia, will continue to transit through Russia, while imports of intermediate goods and energy will remain highly concentrated on this partner. Last, despite the lifting of US sanctions on Belarusian potash (20% of global production), logistical constraints related to the continuation of European sanctions will continue to limit the potential for a sustained improvement in external accounts. The current account deficit is mainly financed by the reinvestment of income generated by Russian investments in the country. Efforts to establish trade partnerships in Sub-Saharan Africa and South America to reduce dependence on Russia are expected to yield limited results given logistical costs and the complexity of developing new trade routes to such distant destinations.

Authoritarian regime firmly anchored in Russia’s sphere of influence

The re-election of President Alexander Lukashenko for a seventh consecutive term in January 2025, with 87% of the vote, confirmed the resilience of a regime that has been in power since 1994. Once again, the elections were deemed neither free nor fair in a context marked by the banning of an independent media, the exile of the opposition and the continuation of political repression. The 2020 protests, which represented the most significant threat to the regime since independence, led to the durable tightening of political control. Constitutional amendments passed in recent years have increased executive powers and allow the President to maintain decisive influence over political life, even in the event that he chooses not to remain in office. No significant political liberalisation is expected despite the release of several hundred political prisoners since 2025 in the wake of negotiations with the US. The authorities are likely to continue prioritising regime stability, control over civil society and the quashing of any form of political dissent.

The war in Ukraine will continue to shape the country’s geopolitical environment in 2026 and 2027. Without directly participating in the fighting, Belarus will remain a key strategic ally of Russia, making its territory, refining capacity, industry, infrastructure and logistics capabilities available to Moscow. Their ties are expected to deepen further within the framework of the Union State, a project launched in the late 1990s aimed at strengthening political, economic, military and regulatory integration. Largely symbolic for a long period, this project has gained momentum since 2020. Both countries will thus continue implementing several integration programmes, particularly in energy, industry, transport, taxation and defence. However, Mr. Lukashenko is likely to continue avoiding any direct military involvement in Ukraine, as such a decision could fuel internal tension in a country where public support for the war remains low. While talks between a US envoy and Lukashenko conducted since 2025 have resulted in targeted easing of US sanctions in exchange for the release of political prisoners, EU sanctions still remain in place, including restrictions on the use of EU airspace and road networks. As a result, the authorities will continue to prioritise further relations with Russia and other non-Western partners, such as countries in Africa or North Korea, in order to reduce both diplomatic and economic isolation.

Last updated: June 2026