World Economy

Russians Feel the Heat

Russians Feel the HeatRussians Feel the Heat

Russians are starting to feel the weight of their country’s economic crisis, fueled by dropping oil prices.

In December, Putin said the peak of the recession had already passed, despite experts’ predictions that a plunge in oil prices would make Russia’s economy suffer through 2016. But with Russians feeling the stress of falling wages alongside rising costs of basics like food, it is becoming harder for Russia to shrug off the crisis, Vocativ reported.

The Russian economy relies on energy exports for half of its federal budget, according to The New York Times. So as oil prices plunged from $97 a barrel in 2014 to around $30 a barrel as of January, the Russian economy also took a turn for the worse.

Here are some of the numbers behind the everyday impact of the crisis:


Russians’ real wages, or salaries adjusted for inflation, plunged since January last year. Working hours have also been cut and, in some cases, wages were withheld from employees.

Salary issues prompted hundreds of Russians to demonstrate against their workplaces or new expenses—such as taxes and revamped policies on pensions—as people are pinching pennies.

  Food Prices

Government statistics show food prices rose at least 20% in 2015, due to inflation and sanctions western nations imposed in response to Russia’s annexation of Crimea and the crisis in Ukraine. The Kremlin has fought back. In August, authorities bulldozed tons of western food that violated Russia’s ban on high-end western imports in response to sanctions against the country.

One English teacher in Russia, Marina Nepomnyaschchy, told the BBC that her family has cut down on the amount of groceries they buy, and turned to cheaper products. “I feel inside that something is wrong,” she said about the crisis.

Russians have been pushed to eat lower-quality food. An investigation by a Russian agricultural watchdog in October found that 80% of cheese in the country is illegally injected with vegetable fat to bulk it up, NBC News reported then.

 Income Inequality

Sales for new cars in Russia plunged 40% this year. But not everyone seems to be suffering. Rolls-Royce sales increased 5% from January 2015-2016—an indication of income inequality in the country.

For many, economic challenges have also impacted ability to travel. A whopping seven million fewer Russians could afford travel outside the country between January and September last year, compared to the same period in 2014, according to the State Statistics Service. With many Russians struggling to afford just food and clothing, travel might be the last thing on their minds.

  Borrowing Cuts

Borrowings of Russian banks from the Bank of Russia will decline and stabilize in 2016 at the level of 4-5% of total banking sector commitments, Russia’s Analytical Credit Rating Agency said on Friday in its research, Tass reported.

The average annual level of Central Bank’s funds in total commitments of banks amounting to 10% is a threshold value from standpoint of the negative impact on financial stability of the banking system, ACRA said. The above share in banks’ commitments equaled 10.4% in 2014 and 10.2% in 2015.

High price of resources and limited need for extra funding against the background of stagnating credit activity are main reasons of the declining amount of borrowings, ACRA reported.

  New Bonds

Russia is going to press ahead with plans to issue its first sovereign bond since the US and Europe imposed sanctions on Moscow, despite a warning from Washington that banks should not participate in the offering, Yahoo reported.

The Kremlin’s budget has come under severe pressure following the steep falls in global oil prices and the impact of the sanctions.

Russia invited European, Chinese and US banks to bid for the bond issue and asked them to make a request for proposal.

Deputy Finance Minister Sergei Storchak told reporters on Thursday that enough of the 25 foreign banks sent an inquiry earlier this month had replied for Russia to proceed with the issuance.