VILNIUS/TALLINN -- Belarusians seeking to escape a big tax increase have boosted car sales in neighboring Baltic countries, helping accelerate their economic growth to the European Union's highest and depriving their own country of foreign currency.
Car buyers have been defying President Aleksandr Lukashenko as his country struggles to contain the ruble's plunge. Last month Lukashenko blamed a rush to buy cars abroad for a shortage of foreign currencies and on Monday, Belarus devalued its currency by 36 percent against the dollar, but failed to halt a run on the ruble.
First-quarter car sales rose as much as an annual 83 percent in the three countries surrounding Belarus. Gross domestic product rose 8 percent in Estonia, 6.9 percent in Lithuania, the fastest among EU countries that have reported for the period, according to preliminary data. Latvia's economy grew 3.4 percent. Detailed figures to break down the impact of rising car sales aren't available yet.
"People are throwing money into any car they can buy ahead of the tariff increase," Nikita Shushko, said at the Medininkai border checkpoint on May 14, carrying eight cars on his trailer. "We are buying everything, from good cars to clunkers."
Demand for used cars is growing as Belarus prepares to unify its tariffs for vehicle imports from July 1 with other countries in a customs union that also includes Russia and Kazakhstan. Tax rates for Belarusians will jump as much as eightfold and may add at least $3,000 to a car's cost.
As much as 25 percent of the used vehicles sold by Amserv Grupp, Estonia's third-largest car retailers, were bought by Belarusians, according to Margus Nommik, the company's head of used car sales.
"Belarusian buyers have been really helpful in cleaning up our market during the past two years as they have been preparing for this customs union for a while now," said Aare Steinberg, a head of used car sales at Tallinn-based Saksa Auto AS.
The pace of car-sales growth contrasts with retail sales in other industries, held back by household debt and unemployment following the toughest government austerity measures in the 27- member European Union in 2008 and 2009.
March retail sales grew an annual 5 percent in Estonia, 1.3 percent in Latvia and 4.9 percent excluding cars in Lithuania. That suggests the boost from the increased car sales won't last, said Vilija Tauraite, an economist at SEB Bank AS in Vilnius. "It's a one-off factor, which will disappear from July 1 and retail results may slow substantially as people still remain cautious about spending," she said.
About 800 personal cars are registered every day by Minsk traffic police, Mayor Nikolai Ladutko said on March 29. The country's revenue from duties on imported cars quadrupled to as much as 17 billion rubles ($5.5 million) a day in April from an average of 4 billion rubles at the end of 2010, Aleksandr Shpilevski, chairman of Belarus Customs Committee, said April 4.
Foreign-currency reserves hit a 1 1/2-year low in March and the current-account deficit reached 16 percent of GDP, prompting Lukashenko to look to Russia and other partners for a bailout. The Belarusian ruble lost almost a quarter of its value on May 12 after the central bank lifted restrictions on foreign- currency sales to households and increased the benchmark interest rate to 14 percent, the highest in the world.
Lukashenko linked his country's foreign-currency difficulties to increased demand for used cars from abroad. "The car fever has been a great distress to us," he said on April 15. "We realized that people will rush to the banks in order to buy cars. This is not the main factor, but this is a factor - one billion dollars withdrawn from circulation."
Belarus's trade deficit almost quadrupled to almost $2.36 billion in the first quarter from $681 million in the same period a year earlier. Imports surged 62 percent $11.3 billion over the period, it said. None of that will keep Belarusians from buying up used cars abroad, some with the hopes of sending them on through the customs-free border to Russia at a profit, said car dealer Shushko.
"There's no foreign currency in Minsk, but I'm sure people will find dollars and euros somehow, somewhere for another month before the tariff increases," he said.