Reforms toward a market economy have been suspended since 1994 in a government effort to maintain Soviet-style centralization. Most industries, including manufacturing and farming, are state owned and operated. In 1996 the private sector’s share of the country’s gross domestic product (GDP) was estimated at 15 percent, the lowest of all Eastern European countries. High average annual rates of inflation between 1991 and 1996 severely impeded economic growth and drove up prices for food and services. In the same period annual output declined in almost all sectors of the economy. The 1999 GDP of Belarus was an estimated $26.8 billion. Trade and other services accounted for 45 percent of GDP; industry, including mining and manufacturing, 42 percent; and agriculture and forestry, 13 percent. Approximately 5.3 million people contribute to the economy of Belarus. Of the labor force, 35 percent are employed in industry; 21 percent in agriculture and forestry; and 40 percent in services such as trade and transportation. Unemployment is officially estimated at 2.3 percent, but underemployment and irregular wage patterns are common.

Devastation during World War II nearly wiped out agriculture and industry in the Belorussian S.S.R., and the intensive postwar drive to restore the economy resulted in a large industrial sector that depended on the other Soviet republics, particularly Russia, for energy and raw materials. The dissolution of the Soviet Union not only dramatically increased the cost of those raw materials but also reduced the traditional market for Belarusian manufactured goods. As a result, production decreased in Belarus during the early 1990s. Moreover, the movement toward a market economy in Belarus was slower than that of other former Soviet republics, with only a small percentage of state-run industry and agriculture privatized in the years following independence. Largely in response to this economic upheaval, Belarus sought closer economic ties with Russia.

Belarus has seen little structural reform since 1995, when President LUKASHENKO launched the country on the path of "market socialism." In keeping with this policy, LUKASHENKO reimposed administrative controls over prices and currency exchange rates and expanded the state's right to intervene in the management of private enterprise. In addition to the burdens imposed by extremely 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, 1998-99, and persistent trade deficits. Close relations with Russia, possibly leading to reunion, color the pattern of economic developments. For the time being, Belarus remains self-isolated from the West and its open-market economies.