Page 28 - RusRPTMay21

Also holding retail back is the ongoing contraction in real incomes, athough one of the side affects of the lockdown is savings have soared and have created a pool of cash that economists expect to be unleashed as Russia comes out the other side of the pandemic.
After going positive very briefly at the end of 2019 as the spending on the 12 national projects started to trickle down to the population, real incomes fell by 3.5% in 2020 due to the pandemic shock, leaving the average Russian’s income 10% lower than in 2013.
One survey showed that after a six-week lockdown at the start of the pandemic, nearly half of households had no savings or only enough to cover a month of expenses.
At the same time food prices have risen by 7.7% since February 2020 year-on-year. The cost of basic products such as sunflower oil and sugar has grown by 27% and 48% respectively, causing the Kremlin to impose administrative measures designed to keep the prices of staples under control.
However, drilling into the numbers and it appears demand and consumption amongst consumers has already started to improve.
Another important indicator of consumer demand – the volume of paid services to the population – posted 1.4% y/y growth in March, thus signalling that the pandemic-driven recession in the consumer area is finally ending. The seasonally adjusted IHS Markit Russia Services Business Activity Index also jumped to a seven-month high of 55.8 in March, up from 52.2 in February, its strongest result in well over a year.
Volumes of residential construction jumped 19.8% year-on-year – the highest rate in 6 years – while real wages rose 2% y/y in February. The unemployment rate in March dropped to 5.4% from 5.7% in February and the peak level of 6.4% in August 2020.
Going forward the rate and strength of Russia’s bounce back will depend on a number of factors out of the Kremlin’s control, including the threat of new sanctions, the size of this year’s harvest and the price of oil on the international commodity markets, but the government is assuming a modest 3.3% expansion, which remains well below potential thanks to the Kremlin’s policy of austerity budgets to protect against the sanctions threat.
28 RUSSIA Country Report May 2021 www.intellinews.com