06.11.08

The Russian authorities keep advising the nation to stay calm despite the world financial turmoil, but the average citizens seem to be ever more active in withdrawing cash from private banks. They are also afraid of losing jobs.

Russian President Dmitry Medvedev has told his fellow citizens he has not withdrawn his savings from the bank, converted them into dollar cash, or bought shares.

"I have preserved all of my accounts in the banks," he told the weekly Argumenty i Fakty. "I am pretty certain my savings are not at risk, just as the money of other Russian bank clients."

According to Medvedev's pre-election declaration he keeps a total of 2.74 million rubles on eight bank accounts.

Prime Minister Vladimir Putin told the same weekly in an interview the media were overusing the term 'crisis' in relation to the economic situation in the country. In his opinion, it is possible to speak in crisis-like terms about the United States, where it all began. As for Russia, the country merely experiences the aftershock of financial quakes.

However, as NEWSru.com says, Russian retail clients in September alone withdrew from private banks 1.5 percent of their deposits, and October will see a turn from bad for the worse. Experts warn there may follow capital flight from state-run banks.

In September, says the daily Vedomosti, only private banks were affected. The ten biggest ones saw the deposits on private accounts shrink by 2.8-5.7 percent - 37 billion rubles in real terms. In the meantime, state banks kept drawing funds. However, this month must have been not so good for state-controlled banks. Sberbank predicts an outflow.

At the end October the banking system, according to the deputy CEO of the Vozrozhdeniye bank, Alexander Danilov, may discover 15 percent of deposits are gone, the daily says.

The world financial crisis has stripped Russia of two essentials of prosperity - high oil prices and foreign investments, says the daily Novyie Izvestia. Over the past three months the net capital flight from Russia reached 50 billion dollars. In contrast to this in the first seven months of 2008 the net influx of capital into the country reached 30 billion dollars, and in the whole of 2007 - 83 billion dollars.

The oil price situation is basically the same. As long as the prices remained high, the country had a budget surplus and soaring gold and foreign exchange reserves. Now, the price of one barrel of Russia's Urals blend is below 60 dollars. If it sinks further, the budget next year may develop a deficit.

According to the latest statistics issued by the Bank of Russia the country's international reserves now stand at 515.7 billion dollars. Since August 8, when they were at an all-time record high of 597.7 billion dollars, they have been down by 81.8 billion dollars, or by 13.7 percent.

Experts say shrinking incomes will make the Russian consumer more cautious. First and foremost there will be a slump in demand for expensive goods and luxuries. The average customer will be spending mostly on every-day essentials.

The director of the Post Industrial Society Studies Center, Vladislav Inozemtsev, told the daily Novyie Izvestia "all glamour will be gone - from television screens, from shop windows, and from boutiques."

"There will be no money to keep soccer clubs, to buy players for 30 million euros, luxury apartments, family homes in the country, expensive tours, goods and elite shops," he warned.

What makes the current situation so different from the financial crisis of 1998 is this, the analyst says. "Whereas then the people first saved money only to see it lose value overnight, this time savings will be OK. Bank accounts will not be wasted. Nor will there be a devaluation of the ruble. But current incomes will shrink due to layoffs and wage cuts."

Inozemtsev believes the first signs of this will be in site in one or two months from now, when those being dismissed today will be paid their last layoff compensation.

An opinion poll by the national public opinion studies center VCIOM, conducted in October, showed that one in two Russians described the theme of unemployment as the most sensitive one.

One-third of the respondents (35 percent) said they had acquaintances who had lost jobs over the past two or three months. Ten percent of the polled said such victims of the crisis in their immediate entourage were many, and 25 percent said two or three of their friends had been given the sack.

According to official statistics released by the state statistics service Rosstat four million Russians, or 5.3 percent of the economically active population - were jobless. The Health and Social Development Ministry said that rate was the lowest for the past 13 years.

Experts questioned by the daily Vremya Novostei do not believe that growing unemployment in Russia is fraught with some social or political upheavals.

The deputy general director of the Political Technologies Center, Alexei Makarkin, advises against jumping at hasty conclusions. He invites one and all to wait until the real scale and structure of unemployment get clearer.

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Source: Itar-Tass