Page 38 - RusRPTMar20

4.5.2​ Income dynamics
Russia’s real wage growth in December accelerated by the highest rate in almost 2 years (6.9% y/y). ​Real incomes are starting to rise again and analysts anticipate this trend to continue throughout 2020 as the government increases spending. Putin said on several occasions recently that the top priority in 2020 is to increase incomes.
The expectations for the income trend remains positive based on the budget statistics. ​According to preliminary Finance Ministry estimates, federal budget expenditure exceeded RUB1.7tn in January: that is 53% higher than January 2019 and in line with the average monthly volume in the second half of last year. Given that President Putin in January announced a package of additional support measures for families with children, we expect both salaries and the income trend to remain firm. Although we are not sure that implies a promising outlook for consumption. We expect the Chinese virus to reduce non-resident spending in Russia and, thus, expect retail trade growth to decelerate to 1.7% y/y in February.
In December, wages increased +10.1% y/y in nominal terms.​. The most visible growth rates were registered in financial services (+20.3% y/y), pipeline transportation (+18.4%), tobacco (+18.3%), public administration and defence (+16.9%), postal services (+16.2%) and pharmaceuticals (+14.3%). Growth of this scale last occurred in August 2018, when wages were supported by public wage indexations in late 2017-early 2018.
It is likely that a substantial part of this spike is transitory: end-of-year paycheques are bonus-driven, and bonuses are a substantial part of the wage bill even in the public sector in Russia. Therefore, next month's report for wage growth in January will be highly indicative of the contribution of the one-off bonus payments and wage indexation behind this wage pick up.
38​ RUSSIA Country Report​ March 2020 ​ ​www.intellinews.com