26 billion, or 6.9 percent of GDP. Pressures were partially eased by the disbursement of the two tranches of the EFSD loan (totaling US$600 million), disbursement of a bilateral loan from Russia (US$700 million), and the issuance of EurobondsUS$1.4 billion in 2017, and US$0.6 billion in February 2018. Exports recovered, helping to bring down the current account deficit to 1.1 percent of GDP in January-November 2017 (vs 3.2 percent a year ago), yet driven by the primary income deficit of 4 percent of GDP. Real wage increases have stopped the deterioration of household incomes. In 2017, real wages and disposable incomes grew by 6.2 and 2.4 percent respectively, benefiting from lower inflation. Disposable incomes growth was the highest in Minsk, but also in regions with higher absolute poverty rates, such as Brest and Gomel. The hires-to-terminations ratio throughout 2017 exceeded

The share of households below the official poverty threshold remained stable throughout the first three quarters of 2017.

Improved household consumption and investment activity, along with gradual increase in exports, will help FIGURE 1 Belarus / Real GDP growth and contributions to real GDP growth FIGURE 2 Belarus / Actual and projected poverty rates and real GDP per capita Percentage points 15 Poverty rate (%) 60 GDP per capita (constant LCU) 2500000 10 5 50 2000000 0 40 1500000 5 30 10 1000000 15 20 Q1/14 Q3/14 Q1/15 Q3/15 Q1/16 Q3/16 Q1/17 Q3/17 Total consumption of goods and services Gross capital formation Exports of goods and services Imports of goods and services Statistical discrepancy GDP growth 10 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Upper middle-income pov. rate GDP pc 500000 0 Sources: World Bank Staff Calculations based on Belstat data. Sources: World Bank. Notes: see Table 2. MPO 46 Apr 18 60

World Bank ECA Economic Update May 2018 the economy to grow. At the same time, persisting domestic structural bottlenecks related to unaddressed legacy issues of misallocation of capital and low export diversification will continue to constrain the growth potential. Weak foundations for a sustainable growth recovery imply that income per capita gaps between Belarus and its neighbors may widen as the economies of the Baltic States and Poland are projected to grow on average above 3 percent per annum. At the same time, modest growth would ease balance-ofpayment pressures, allowing to maintain a current account deficit between 2 and 3percent of GDP over the next three years. Risks and challenges Downside risks from external factors are coming from two sources. First, although the headline current account deficits have narrowed down, a public debt to GDP ratio