Recession impact on the regions of Belarus: The role of initial conditions, economic policy, and small business

The study focused on the changing economic situation in Belarus’s regions (oblast and rayon levels) during recession. Summary indicators – characterizing the starting conditions and changes in provincial economies in recession environment – were devised based on the Principle Component Analyses (PCA). Econometric analysis of panel and cross-section data allowed identifying economic, institutional and geographical factors affecting sub-national development (focusing on small business development).

The study showed that during recession regional disproportions increased both on oblast (region) and rayon (district) strata. For areas possessing more favorable starting conditions (substantially due to geographical factors) overcoming recession was easier. Small business development slightly smoothed out the escalated regional discrepancies as, on average, micro and small enterprises demonstrated better recovery in the regions with the worst starting conditions. Whereas budgetary centralization put less developed administrative areas in rather adverse setting, advancement of small business (and, therefore, decline of area-to-area disproportions) was stimulate by region-specific conditions (market size, costs) as well as by the overall economic environment in the country (domestic demand dynamics, inflation) and territory-neutral policy (macroeconomic stabilization, business environment improvement).

The study was executed within the framework of the “Development of the Kastryčnicki Economic Forum" International Technical Assistance Project implemented with  the assistance of the European Union.