Current Crisis Characterized by Decline in Real Personal Income

6 july 2016

“The onset of the current crisis in Russia was to a significant extent associated with an outside shock – the collapse of the global oil prices which subsequently resulted in the depreciation of the ruble and accelerated inflation in Russia,” this is what experts of the Analytical Center claim in its bulletin "Employment, Income and Private Consumption: Regional Differential". In their opinion, the decline in population welfare indices was inevitable considering the situation.

In the previous bulletin issues the experts examined the to-date dynamic pattern of sales of real estate, motor cars and other durable goods in Russia throughout the current recession. This bulletin issue is dedicated to analyzing the trends in unemployment, personal income and wages, as well as the consumer spending in Russia by region.

The experts conclude that the current crisis is characterized by rather prolonged decline in both economic activity and in real income, contributing to the people’s negative perception of the crisis. In the meantime, the unemployment is lower than during the crisis of 2008–2009. More than half of the unemployment growth in the past two years occurred in the Central Federal District, primarily in Moscow and the Moscow Region, claim the experts’ estimates. But even with the growth in the actual number of unemployed reaching 59,000 (in Q1 2016 compared to Q1 2014), the unemployment rate remains low, hovering at some 2%.

The authors of the bulletin admit that the current crisis is characterized by a decline in real personal income due to high inflation combined with a slowdown in the nominal income growth. The problems and hardships of the poorer population segments are mounting with per capita income below poverty line. In 2013 the poverty rate had dropped down to 10.8% of the population (with 29% back in 2000), but it began to grow again in 2014, averaging 13.3% in 2015.

“The decline in the real personal income in Russia results, first of all, in car sales and other durable goods," the experts explain on the pages of this bulletin. “However considering that the crisis has been raging for nearly two years now, its impact on the situation of the population is growing too: poverty is on the rise, the pattern of demand for foodstuffs and the entire retail pattern is changing, i.e. the share of foodstuffs in total sales is growing. The authors are convinced that the decline in personal income leads to even greater spending tightening on account of triggering the 'defense' consumer behavior pattern, which complicated the prospects of reverting to growth not only of the demand, but of the country’s economy on the whole.

For more check the bulletin of the socio-economic crisis in Russia titled "Employment, Income and Private Consumption: Regional Differential"

Other issues of the bulletin of the socio-economic crisis in Russia can be found in the Publications section