Working Papers
Computable general equilibrium model for Belarus: theoretical aspects and practical applications
The paper develops a computable general equilibrium (CGE) model for Belarus to assess the consequences of alternative integration strategies and external shocks.
The
modeling exercise suggests that Belarus encounters difficult choices and substantial risks in the
event of geopolitical and economic realignments. Primary raw material processing industries,
as well as industrial sectors heavily dependent on the Russian market and cheap energy
resources, could face significant output losses in the event of a sharp increase in oil and gas
prices and Belarus's trade reorientation away from Russia and toward the EU. Export-oriented,
higher value-added sectors (mechanical engineering, communications, pharmaceuticals, and
light industry) have the potential to increase production and exports through the flow of labor
and capital resources. With carefully designed EU support – focused on targeted energy
subsidies, support for Belarusian firm integration into European production chains, and
productivity-oriented financial assistance – the negative short-term consequences of energy
shocks and trade reorientation from the Russian to the European market can be mitigated. While
short-term adjustment costs are unavoidable, closer ties with the EU can help Belarus overcome
its structural dependence on Russia and secure long-term gains in growth and welfare.