Debt bubble. Do Russians live on credit?

In one year, households’ debts to banks in Russia grew by 26% and reached 23 trillion rubles.

High oil and gas prices are pouring huge sums of money into Russia. The state has gigantic reserves and almost no debts, but the opposite is true for the people. They, like never before, are taking out loans in large quantities. The Austrian edition became interested in this phenomenon. The press.

There is money, but not for everyone

There is more than enough money in the Russian state treasury. And in such an abundance, which the country has not seen for many years. Oil alone, Russia’s most important export, has cost $ 85 a barrel, more than it has since the epic collapse in 2014, when it fell from $ 115 to less than $ 30. This is how much oil has cost only once, for some time in 2018. Prices for Russian natural gas, the second most important export commodity, have been higher for several weeks than at the peak of the commodity boom in 2008.

According to the calculations of the rating agency Fitch, this year the budget and extra-budgetary funds will receive $ 125 billion (RUB 9 trillion) in oil and gas export revenues… This is almost 70% more than in the crisis year of 2020, and even more than in the pre-crisis year of 2019. The financial cushion is also growing: international gold and foreign exchange reserves have already exceeded $ 600 billion – more than ever before… The National Wealth Fund, a buffer against tough times, has $ 191 billion, already equivalent to 12% of GDP. And the public debt, which on average in the EU reaches 94%, is still below 20%.

And what about people?

Thus, the state has money and almost no debt. Unlike Russian citizens. They have seen much better times. Since after the economic shock in 2014 the state is saving with all its might, they hardly feel the current surplus of funds. Instead, they now live on credit so much that even the central bank has sounded the alarm several times. Is the debt binge turning into a dangerous bubble?

In one year, households’ debts to banks grew by 26% and reached 23 trillion rubles. This is the first time in history when they equaled the amount that people keep in ruble accounts.

Apart from mortgages, the growth rate is especially high for consumer loans. In the first eight months, they increased by 14% to 11.1 trillion rubles, according to the central bank.

In Russia, they try not to use the word “bubble” whenever possible. And yet, it was not only the central bank that was on the alert. “Perhaps the situation is not yet entirely critical,” Igor Nikolaev, head of the Moscow Institute for Strategic Analysis of FBK, said in an interview with Die Presse, “but there is certainly a trend. And it is not decreasing.”

At first glance, the economy and consumption are running like clockwork. But appearances are deceiving. The economy, which is growing at 3% this year, is expected to return to stagnation by 2022, in which it has been for half a decade. And the current consumer demand for two-thirds is determined not by earned money, but by borrowed money, as the analysis of Raiffeisenbank carried out in September showed.

“This is a delicate trend, because the real disposable income of the population has been declining for many years,” says economist Nikolayev.

For a rainy day

Wages and employment are currently on the rise again, but not enough to offset last year’s losses, according to the Ministry of Economy, so the trend towards real disposable income remains negative compared to 2019. Because now Russia is also gripped by global inflation. According to the ministry, prices will rise by 7.4% instead of the previously projected 5.8%. Of course, this is partly due to internal factors, such as the food import embargo that Putin wants to take revenge on the West, and the lack of market competition.

As Alexander Dokukin from the Moscow Center for Assistance to Credit Debtors said in an interview, about 20% of Russians pay for treatment with a loan, 18% – the education of their children, and even more – interest on an existing loan. This also applies to an increasing number of retirees. For most, the only way out is personal bankruptcy.

“It is not surprising, given that the average interest rates on loans are from 10% to 14%. In order to get out of the vicious circle and, finally, to increase the income of the population again, it is necessary to push many levers,” concludes Die Presse. could critically consider its iron-fisted austerity, says economist Nikolayev. “The state is saving money for a so-called rainy day. But when will he be black enough for the government to give more money again? “

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