Working Papers
Computable general equilibrium model for Belarus: theoretical aspects and practical applications
Abstract
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 will face 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 low-cost energy, could suffer significant output losses if oil and gas prices rise sharply and Belarus reorients trade away from Russia toward the EU. Export-oriented, higher value-added sectors (mechanical engineering, communications, pharmaceuticals, and light industry) have the potential to increase production and export through labor and capital flows. With carefully designed EU support — focusing on targeted energy subsidies, helping Belarusian firms integrate into European production chains, and providing productivity-oriented financial assistance — the negative short-term effects of energy shocks and the shift in trade from Russia to Europe 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.
This research was co-funded by the European Union. Its contents are the sole responsibility of the authors and do not necessarily reflect the views of the European Union