VEB: Russia to encounter drop in real incomes, higher inflation

A customer walks past boxes with fruit at a Metro Cash and Carry store in Moscow August 8, 2014. ― Reuters pic
A customer walks past boxes with fruit at a Metro Cash and Carry store in Moscow August 8, 2014. ― Reuters pic

MOSCOW, March 24 — Real disposable incomes in Russia will shrink by up to 12 per cent this year, inflation will soar towards 20 per cent, while unemployment will climb higher, economists at state development bank VEB said today.

A drop in real disposable incomes is a sensitive problem for Russia, especially with rising prices hitting living standards. For years, President Vladimir Putin has promised to raise real disposable incomes, a measure of people’s purchasing power.

Unemployment in Russia will reach 6.0 per cent to 6.2 per cent this year, the VEB research team said in a report, up from 4.4 per cent seen in January.

“Implementation of extra support measures to support employment would allow to avoid a higher increase in the number of unemployed,” they said.

Russia’s economy was expected to contract in coming quarters amid a spike in inflation, the central bank said in March as it kept the key interest rate at 20 per cent after an emergency rate hike that followed the beginning of what Russia calls “a special military operation” in Ukraine in late February. Read full story

Annual consumer inflation, which the central bank targets at 4 per cent, will reach 19.3 per cent by year-end, VEB said.

Economists polled by the central bank earlier in March expected the economy to contract by 8 per cent and inflation to reach 20 per cent in 2022. — Reuters