MINSK, 24 February (BelTA) - Closer coordination in the financial sector in the Eurasian Economic Union (EEU) will generate 0.9% in additional growth in Belarus' GDP, reads the report Liberalization of the financial market of the Republic of Belarus within the EEU issued by the Center for Integration Studies of the Eurasian Development Bank (EDB), BelTA has learned.
“Belarus will benefit from the movement toward the single finance market in the EEU. The single financial market will produce significant economic effects such as investments in the common market, with maximum returns, broader risk distribution, and lower borrowing costs, especially for smaller economies,” said the EDB.
Overall, EDB experts assess that closer coordination in the EEU financial sector will ensure an additional growth in GDPs of Belarus (0.9 percentage points), Armenia (0.4 percentage points), and the Kyrgyz Republic (0.3 percentage points). The main benefits from financial integration for these countries will be ensured by their trade with other EEU member states and the lower cost of financial resources.
The EDB's survey of financial institutions has shown that the sector can see a decrease in its costs by 10-15% if the barriers associated with both access to markets and the current operation of banks and insurance companies are lifted. Experts found out that most risks related to the permission for banks from other EEU member states to establish branches in Belarus are low or moderate. These risks can be mitigated by harmonizing the member states' procedures and requirements for the issuance of banking licenses to branches, as well as prudential regulations for banks, deposit insurance, and by creating supranational banking administration, and enhancing monetary policy coordination,” the report reads.
The EDB stressed that the creation of the single financial market also envisions the liberalization of capital flows by Belarus and foreign exchange regimes with the EEU countries. To ensure that the lifting of capital account barriers would not result in a crisis or higher foreign debt and would not threaten financial stability, it should be tied to a number of recommended conditions for the country's macroeconomic policy. In order to minimize a volatility of capital flow it would be advisable for Belarus to develop and apply Capital Flow Management Measures, if the need arises,” the report reads.
The report also considers liberalization risks in insurance associated with the opportunity for insurance companies' branches to provide services throughout the EEU. The recommendations are provided as to how to mitigate relevant risks. EDB experts comment that in many developing countries foreign branches managed to oust national insurance companies from the market, but this risk for Belarus is rather low.
More about EconomyYesterday 14:11
Back to list
