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Consumption has gone into negative

According to Rosstat, the economic downturn in Russia in 2020 amounted to 3.1% – significantly better than expected. Households were hit hardest by the crisis, reducing consumption by 8.6%. At the same time, the fall in real disposable income of the population is estimated by Rosstat at 3.5%. It is noted that by the end of the year, citizens had invested in foreign currency and increased their savings. The same is observed in the first months of 2021.

The economic crisis caused by the pandemic has forced citizens not only to spend less on clothing, travel and entertainment, but also to eat more economically. Many have switched to cheaper food, not paying attention to its quality. The average consumer's diet is now dominated by bread, potatoes and dairy products, displacing vegetables, fish, seafood and quality alcohol. Experts predict a further shift in consumer preferences towards cereals, flour, butter, seasonal vegetables and sugar. The same applies to non-food products and household comfort in general: consumption is declining; the expensive is being replaced by the cheap. According to Nielsen, a global FMCG company, the low-price segment in food and commodities is now 17.7% – 0.8% above the annual average. And the share of premium price segment goods, on the contrary, decreased from 35.8% to 34.4%. Most noticeably, this affected meat, fruit juices, water, tea, pasta. If earlier in the low price segment the share of pasta was 18.7%, now it has grown to 22.8, in the sale of bulk chocolates – from 14% to 15.7, in the sale of mayonnaise – from 7.3 to 9.5. Konstantin Loktev, director of work with retailers at Nielsen Russia, said that almost a quarter of respondents note the impact of the pandemic and the measures that have been taken to combat it on the incomes of the population. He also said that 66% of consumers noticed an increase in prices, and 30% of those surveyed began to look for discount products more often. Households hit hardest by the crisis, with consumption declining 8.6%.

Another study (conducted by Rabota.ru and Samokat grocery delivery service) found that 35% of Russians spent less on food, 27% saw no change in food spending, and 38% increased food costs. Of those who save on food, 42% of respondents have cut their spending by more than half, 27% by a quarter, and only 8% noted a slight difference. The majority of those surveyed (72%) reported that they began to cook more often at home, and 64% of citizens plan to take food from home with them to work after the end of the pandemic. Elderly and low-income citizens are the most active in reducing spending. More than half of Russians reported that their expenses had increased. Among the reasons, 33% of respondents named the rise in prices. The share of those who are trying to cut costs by reducing the consumption of familiar goods and services also increased from 28% to 44%. The main savings are on products.

According to experts' forecasts, consumer demand will recover for a very long time until the levels of March 2020 and will recover no earlier than 2022. “Firstly, in order to return consumer demand, we need to return the same level of employment that was before the pandemic”, says Vice-Rector of the Financial University Alexander Safonov. “Accordingly, we need to provide jobs for at least 2-3 million people. we understand that the layoff process is not yet complete”.

The decline in consumer activity continues, but experts believe that all is not lost. “Despite the crisis, we see that the growth of nominal wages among the working population continues”, says Valery Mironov, deputy director of the Center for Development Institute at the Higher School of Economics in the regions it will be from 3.5 to 5%. Of course, this creates some losses for companies, because they often do not receive revenue, but they have to pay salaries in order to receive anti-crisis support. However, according to Mironov, the threat of a financial crisis remains. “Currently, he says, we are seeing the 5th global recession in the real sector since the 1970s. But all the previous four recessions have been accompanied by a second wave associated with the financial crisis. If this happens, there will be another fall in oil prices and other problems for the Russian economy. It is unlikely that people understand this, but they still feel the situation of uncertainty”. According to forecasts of the Ministry of Economic Development, in 2021 real incomes will increase by 3%.

December was expected to be the most active month of consumption last year. Then the citizens who had abstained began to save money again. As the Ministry of Economic Development predicts, real incomes will increase by 3% in 2021 and will gradually grow in the future. According to the forecast of the Institute “Development Center” of the Higher School of Economics, real incomes of Russians in 2021 will increase by 2.2. Growth will further slow to 1.9% in 2022. “The long-term stagnation of real incomes of Russians, accompanied by a high level of inequality in the country, creates risks of decreasing trust in the state and growing discontent in society”, says the report “Russia in a New Era: Choosing Priorities and Goals for National Development” prepared at the Center development NRU HSE. According to the report, Russians consider the economic growth to be fair, which is created due to the involvement of the entire working-age population and within which material and non-material benefits are distributed in the interests of all members of society.

 

Source: www.rg.ru

News
The OECD predicts acceleration in the global economy and a slowdown in the domestic Russian economy. The decline in household incomes and the contraction of consumer demand may become an additional brake on the recovery of the Russian economy.
According to Rosstat, the economic downturn in Russia in 2020 amounted to 3.1% – significantly better than expected.
The Deputy Chairman of the Bank of Russia Alexey Zabotkin emphasized that the potential economic growth rates do not depend on monetary policy, they are influenced by demography, labor force, and the efficiency of institutions.
The Russian economy continues to lose its attractiveness in the eyes of large transnational businesses as consumers become poorer and the government continues the sanctions war with the West.

The Washington Institute of International Finance (IIF) sharply improved its forecast for the Russian economy. Its experts revised estimates of the fall in GDP in 2020 from minus 4.8% to 3.6%.

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