Page 15 - Eastern Europe Outlook 2020

4.0​ Real Economy
• Retail
Domestic demand will continue to improve gradually in 2020 on the back of low inflation and falling lending rates​. In 2021, the population’s real incomes could be boosted as the next parliamentary elections approach and the government increases social spending.
Real incomes have been stagnant for six years, putting pressure on the population and feeding discontent that has manifested itself in limited popular protests. This pressure is clear from the Watcom Shopping Index that measures foot traffic in real time at Moscow’s leading shopping malls. The index has fallen every year since the index was founded, even in the last two years, despite the end of the recession in 2017.
The index picked up a little in 2019 as Russians turned to credit to finance their shopping, but the outlook for 2020 is little change as the CBR is clamping down on retail loans and incomes are not expected to grow strongly.
There were more positive signs in the last months of 2019 where incomes and retail picked up somewhat due to the improvement in real disposable incomes, which were up by 3% y/y in 3Q19, compared with a 0.1% y/y decline in 2Q19 (these statistics are only available on a quarterly basis). Real wages also showed positive dynamics, rising by 3.8% y/y in October, up from 3.1% y/y growth in September, the latest data available.
In his remarks to investors at an investment summit in December, Putin said one of the top priorities for 2020 was to boost the income of ordinary people. While the discontent has not reached critical levels the Kremlin is well aware it needs to address the issue before feelings boil over.
15​ EASTERN EUROPE Outlook 2020​ ​ ​www.intellinews.com