Russian level of poverty reached historic low in 2023
The poverty rate in Russia fell below 10% for 2023, crossing the historical minimum for the first time in more than 12 years.
Source: Bloomberg
Details: According to the publication, Russia is in "good" shape heading towards 2024 presidential elections. The Kremlin is now spending heavily on social support for families, higher pensions, mortgage subsidies, and compensation for relatives of soldiers.
"Public discontent over the economy largely isn’t there," Bloomberg writes. On the other hand, the Kremlin's constant source of economic concern is the rapid rise of prices, which eats into Russians' incomes.
In contrast, wage growth outpaces inflation. For example, in 2023, the average monthly wage exceeded RUB 74,000 (about US$814). That is roughly 30% higher than two years ago. Furthermore, real disposable income in Russia has not increased by more than 5% in a long time, as of 2023.
According to Bloomberg’s Russian economist Alex Isakov, Russia had accumulated military spending long before it engaged in full-scale aggression. However, the government may still have to choose between spending cuts and tax increases. After all, high military and social benefits can continue to drive up prices.
Isakov also stated that over time, high prices and demand will outperform indicators of infusion of money into specific areas, i.e. supply. For example, annual price growth in February 2024 increased from 7.4% to 7.7%.
Furthermore, the federal budget deficit for this year already reached 1.5 trillion roubles as of the end of February, with the Russian Ministry of Finance projecting a total deficit of 1.6 trillion roubles in 2024. At the same time, cash reserves have already halved.
Background:
- Following the Russian 2024 presidential elections, the Russian government intends to raise taxes on the general public and businesses, bringing in an additional US$27 billion for the budget.
- Russia's military budget will be more than twice that of Ukraine in 2024.
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