The war in Ukraine has forced the Russians into a “permanent economy” regime – citizens continue to cut consumer spending, save on everyday goods like clothing and even food. Moreover, the agency claims that serious problems with the quality of the offer have begun in Russia – it becomes difficult, and sometimes even impossible, to find a worthy alternative to Western brands that have left Russia. Bloomberg writes about this with reference to consumption statistics and polled Russians.
The agency compares the current situation with 2014 after the annexation of Crimea, when there was a sharp and prolonged drop in consumer spending due to a fall in real incomes of the population. Bloomberg notes that the consumer sector accounts for about 50% of the Russian economy, and although Russian President Vladimir Putin speaks of a resumption of growth, one should not expect it in 2023. Finam analyst Olga Belenkaya notes that retail is the main affected sector of the Russian economy in 2022.
As an example, the agency cites the story of Larisa Rudenko, a 45-year-old housewife from Voronezh, who complains that shopping for things for her teenage daughter has become “impossible” – due to the exodus of Western brands, it has become difficult to find affordable and acceptable clothes for a girl. She also laments the decline in income, which makes the choice between clothing and food extremely difficult.
“You just don't know where to go. Maybe more stores will open over time, and we will find a replacement,” says Rudenko.
Experts believe that such problems somewhat contrast with the good performance of the Russian economy in 2022 – GDP fell by only 2.1% at the end of the year, which is almost 10 times better than many economists predicted immediately after Russia's invasion of Ukraine. At the same time, after panic buying in March 2022, consumption fell for almost the entire year and, most likely, will continue to fall in 2023, the agency believes.
The statistics, which will be published by Rosstat on Wednesday, will again show a sharp drop in retail sales. According to the results of January, according to the agency, it will collapse by 10.7%, continuing the negative dynamics for the 10th month in a row. Analysts note that the current cycle of decline has already exceeded the pandemic collapse and is unlikely to stop in the near future. Belenkaya notes that in 2022, retail trade showed its record negative since 2015, declining in real terms by 6.7%.
“The standard of living of Russians peaked in 2014 and has never recovered. The sanctions reduced retail turnover by 10.5% in 2022, setting it back more than 10 years. The outlook for consumers is about the same, as the government is expected to gradually return to restricting imports to support local industry,” said Bloomberg Economics economist Alexander Isakov.
The retail collapse is threatening malls, which are yet to find alternative companies to replace those that have left. The areas are idle, and about 50% of shopping centers have already announced that they are threatened with bankruptcy if new brands do not replace the departed brands. The agency notes that the government's measures to curb the economic impact do not fully reach ordinary Russians – people are becoming more and more frugal and are moving to "permanent savings." Realizing the dire prospects, many Russians stopped taking out short-term loans, which fell even in nominal terms last year.
The austerity trend is confirmed by the sales statistics of one of the largest retailers in Russia, the X5 Retail Group (brands Pyaterochka, Perekrestok, etc.). A specially launched "super discounter" called "Chizhik" showed a 12-fold increase in sales over the year, and the number of chain stores increased 7-fold. However, the company in its report fears that the outflow of the population will become an additional factor in reducing consumer demand in 2023, another factor is the limited supply from the Russian manufacturer.
Rudenko confirms X5's concerns, admitting she's been saving more on expensive food items like coffee. According to her, the family either does not buy such goods at all, or takes them at a discount or cheaper alternatives. However, the basic basket, which includes, for example, milk, eggs and bread, has not changed yet, says a resident of Voronezh. Bloomberg wrote that the death of Russians, for which relatives received compensation from the state, helped to mitigate the consequences of a drawdown in retail trade. Moreover, government payments have led to a reduction in the number of poor people in the country.