Recently, the Belarusian economy has shifted into sustained high gear, along with Ukraine, Russia, and many other Commonwealth of Independent States economies. The economic boom provided by mineral wealth of Russia and other CIS nations and its key location as a transit route between the EU and Russia have enabled it to sustain this impressive growth, albeit from a low base level. Following 9.9% growth in 2006 in the first quarter 2007, the Belarus GDP grew 9%
After the collapse of the Soviet Union all former Soviet republics faced a deep economic crisis. Belarus has however chosen its own way of overcoming this crisis. After the 1994 election of Alexander Lukashenko as the first President, he launched the country on the path of "market socialism" as opposed to what Lukashenko considered "wild capitalism" chosen by Russia at that time. In keeping with this policy, administrative controls over prices and currency exchange rates were introduced. Also the state's right to intervene in the management of private enterprise was expanded, but in March 4 2008, the President issues a decree abolishing the golden share rule in a clear movement to improve its international rating regarding the foreign investment.
In addition to the burdens imposed by high inflation, businesses have been subject to pressure on the part of central and local governments, e.g., arbitrary changes in regulations, numerous rigorous inspections, and retroactive application of new business regulations prohibiting practices that had been legal. Further economic problems are two consecutive bad harvests, 1998-1999 and trade deficits. Also as Belarusian economy has rather tight connections with Russian economy, the financial crisis of the 1998 strike hit both of them hard. In the 1990s poverty became a significant problem. In 1996 research supported by the World Bank showed that the number of poor has sharply increased from 5% in 1992 to 22% in 1995. According to official statistics, 26.7% of urban population and 33.6% of rural population were below the poverty line in 2001.
However, efforts of Belarusian government and some favourable factors such as the Union with Russia which opened vast markets for Belarusian goods and also allowed Belarus to buy oil and gas at Russia's internal price, allowed Belarus to bypass the severe economic hardships and crises that many former Soviet Union transition economies encountered. It resulted in the economic growth seen in recent years. According to the UN World Economic Situation and Prospects 2006 report Belarus registers major economic growth: GDP growth rate as low as 3% in 1999 showed 11% (2-nd place in CIS) in 2004 and 8,5% (4-th place after Azerbaijan and Kazakhstan - oil and gas exporters - and Armenia) in 2005. In terms of GDP growth rate Belarus also outperforms neighbouring Poland, Latvia and Lithuania. Major problem in mid-1990 - inflation, as high as 300% in 1999 constantly decreases, showing 12% in 2005 (which is higher than Russia's 11.5% but lower than Ukraine's 14.5%). UN experts forecast inflation in 2006 will continue to decrease, reaching 10.5% (UN Report)
As part of the former Soviet Union, Belarus had a relatively well-developed industrial base; it retained this industrial base following the break-up of the U.S.S.R. The country also has a broad agricultural base and a high education level. Among the former republics of the Soviet Union, it had one of the highest standards of living. But Belarusians now face the difficult challenge of moving from a state-run economy with high priority on military production and heavy industry to a civilian, free-market system.
After an initial outburst of capitalist reform from 1991-1994, including privatization of state enterprises, creation of institutions of private property, and entrepreneurship, Belarus under Lukashenko has greatly slowed its pace of privatization and other market reforms, emphasizing the need for a "socially oriented market economy." About 80% of all industry remains in state hands, and foreign investment has been hindered by a climate hostile to business. The banks, which had been privatized after independence, were renationalized under Lukashenko.
Economic output, which declined for several years, revived somewhat in the late 1990s, but the economy remains dependent on Russian subsidies. Until 2000, subsidies to state enterprises and price controls on industrial and consumer staples constituted a major feature of the Belarusian economy. Inflationary monetary practices, including the printing of money also has been regularly used to finance real sector growth and to cover the payment of salaries and pensions.
Peat, the country's most valuable mineral resource, is used for fuel and fertilizer and in the chemical industry. Belarus also has deposits of clay, sand, chalk, dolomite, phosphorite, and rock and potassium salt. Forests cover about a third of the land, and lumbering is an important occupation. Potatoes, flax, hemp, sugar beets, rye, oats, and wheat are the chief agricultural products. Dairy and beef cattle, pigs, and chickens are raised. Belarus has only small reserves of petroleum and natural gas and imports most of its oil and gas from Russia. The main branches of industry produce tractors and trucks, earth movers for use in construction and mining, metal-cutting machine tools, agricultural equipment, motorcycles, chemicals, fertilizer, textiles, and consumer goods. The chief trading partners are Russia, Ukraine, Poland, and Germany.
The massive nuclear accident (April 26, 1986) at the Chernobyl nuclear power plant, across the border in Ukraine, had a devastating effect on Belarus; as a result of the radiation release, agriculture in a large part of the country was destroyed, and many villages were abandoned. Resettlement and medical costs were substantial and long-term.