Page 35 - bne monthly magazine June 2024 Russian Despair Index

bne June 2024 Cover story I 35
at 5.7% in 1993, but the 27.9% of the population living in poverty gave a despair index score of 2,367, which is off the scale when compared with those of any and all other emerging markets, the worst of which saw their levels reach the lower hundreds at the worst.
The results for other former Warsaw bloc countries were an order of magnitude lower, but even countries such as Hungary and Poland had despair scores of well over 200. Poland's proximity to Western Europe and economic reforms brought the despair index down to 37
by the time it joined the EU in 2003 but even Russia had wrestled its score down to 28 that same year.
Putting aside the danger of comparing apples and oranges, how does Russia’s despair index of 19.7 and Ukraine’s
of 61.3 compare against the other countries of the world?
US: The poverty rate in the US was 11.5% in February – more than Russia’s poverty rate now – unemployment was 3.9% and inflation was 3.4% in April, giving it a despair index of 18.8 – slightly better than Russia’s result and better than almost all of the EU countries.
However, analysts worry that the US population is living on borrowed time, as the cost of living continues to climb and the increases are being financed by burgeoning credit.
Data released by the Federal Reserve Bank of New York in April shows that people have never taken out loans so quickly as they are doing at the moment. At the end of the first quarter US household debt reached a record level: total debt has climbed to $17.69 trillion, a rise of $184bn, or 1.1%, compared to the fourth quarter of 2023, as people increasingly max out their credit cards; about one in six credit card users utilises at least 90% of their available limit.
In Russia's credit cards are also fuelling a consumer boom that has worried
the CBR. “This significant growth
[in consumer borrowing in the first quarter] may be linked to increased household incomes, which have
sustained high consumer activity. The primary driver of this growth is the credit card segment, where interest rates have traditionally been higher and thus less sensitive to changes in market rates,” the CBR said in its latest bank sector assessment. But the regulator has introduced new macroprudential limits that have tightened the borrowing conditions on credit card use in an effort to pop a potential credit card bubble before it forms.
China: Economic growth has slowed in China, which is grappling with several macroeconomic headaches, but it also has a modest despair index. Inflation was a very low 0.5% in April and unemployment was a modest 5%. Like elsewhere, measuring poverty in China is difficult, but the World Bank estimates China’s poverty rate will continue its rapid reduction in recent
Europe and Eurasia: The picture varies widely in Europe and Eurasia but despair indices range between 20 and 40 for most of the countries in this region.
From the Western European leaders all of the big three of France, German and UK have despair indices of 24.3, 25.1 and 25.4 respectively.
In Central Asia Kazakhstan and Uzbekistan have despair index values of 24.6 and 28 respectively, where none of the three variables are extreme but all are at elevated levels, as they are still in the earlier stages of transition.
In the Caucasus, oil-rich Azerbaijan is the outstanding leader with a despair index of only 12.1 – the lowest result by far in our sample group. What pulls the score down is the government’s claim
“None of the despair indices today are anything like those recorded in the first years after the collapse of the Soviet Union. All of the countries in our sample have emerged from that chaos”
years thanks to the ongoing economic transformation, and it will fall to 15.3% this year before shrinking further to 13.6% in 2025.
Taken together, that gives China a despair index of 19, a shade better than Russia’s level and just behind the US level.
India: Indian poverty is also declining and was 11.3% in January, although the government claims that it has fallen to only 5% in the last month as part of a hotly contested general election. But with a poverty line set at only $12 a month, what passes for the middle class in
India would be labelled as being in deep poverty for most of its emerging market peers. Unemployment was an average of 7.6 in March, and inflation 4.8%.
Taken together that gives India a despair index of 23.5, better than the majority of EU countries.
that poverty is only 5.5%, also reported by the Asian Development Bank (ADB), an extremely low level given that almost all countries in both the developed and developing worlds struggle to get the rate below 10%. But with a poverty rate of $3.65 and a government flush with
oil revenues, social support is available for those that struggle. Georgia and Armenia have more typical scores of 29.9 and 36.7 respectively. Armenia has been reporting deflation in recent months, but it continues to carry the burden of a high level of poverty for 24.8% of the population that drags its result down.
Turkey is also a standout poor performer with a huge despair index score of 91.5 – usually a score only seen in the midst of a deep crisis and by far the highest result in our sample group.
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