01.03.09

By November, expenditures for all Russians surpassed earnings by 7.1%. For the entire year, expenses for the population exceeded earnings by 4.1 billion rubles (25,526.4 billion in expenses and 25,522.3 billion in earnings). In the fourth quarter alone, however, expenses exceeded earning by 166 billion rubles. In 2007, earnings were greater by 819 billion rubles. 

The Ministry of Economic Development has noted that “realized earnings for the year were not sufficient” to maintain usual consumption levels. This forced Russians to spend savings from previous years. Natalia Akindinova, Executive Director of The Development Center, agrees with this assessment: increase in cash flow for the year was zero (it was +3.8% in 2007).

According to Igor Polyakov from the Center of Macroeconomic Analysis and Short-Term Forecasting (known by the Russian acronym TsMAKP), this has never occurred, not even in the 1990s. In 1997, earnings exceeded expenses by 1.3%; in 1998 – by 1.7%. However, then, as well as in 2008, the public were actively selling their rubles for hard currency. In the past year, according to the Ministry of Economic Development, the public exchanged two billion rubles – twice the amount spent in 2007. The percent of income placed in ruble savings deposits and securities fell to just 1/34 of its pre-crisis value - to .2%.

According to Rosstat, money accumulated by the public (remaining ruble deposits, cash and securities) for the last five months fell by 832.9 billion rubles or 9.7%. Deposits alone fell by 754.4 billion rubles (14.7%). According to the Central Bank, ruble deposits declined by 636 billion rubles in the fall (data is not available for December) and deposits in hard currencies increased by 268 billion rubles. 58% of rubles withdrawn from banks have not been reinvested by the public. In December of 2008, each Russian spent twice as many rubles on hard currency than they deposited into ruble accounts. In December of 2007, the ratio was 3:1 - in favor of deposits.

“The location of the rubles withdrawn from deposits is in question. They may be being held in cash and/or spent on (currency) purchases, most likely someone found a way to transfer them abroad," asserts Garegin Tosunyan, the President of the Association of Russian Banks.

The public saved incomes from devaluation by buying goods and hard currencies.

Overspending will lead to a decrease in consumption as people's motivations are changing, declared Polyakov. In November and December, real income and wages fell while unpaid salaries grew by 75% (to 4.7 billion rubles at the end of December). In the fourth quarter of 2008, retail turnover fell 50%, to 8.2%. If to account for seasonal factors, retail turnover fell by 1.2%. Turnover on food items in December rose by a meager 2.5% (down from 12.7% in December 2007). The growth of nonfood turnover amounted to 6.7% (down from 21.7% in December 2007). Both of these indices, despite seasonal fluctuations, proved to be below November's numbers.

In the past two to three months, 69% of respondents have begun to abandon their usual products in favor of cheap goods. 49% noticed a deterioration in their purchasing power, including 10% of respondents who have noticed a sharp decline. The share of expenses for everyday needs may not change. With a decrease in earnings and increase of prices, people must behave rationally and economize. 

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