Half of Russians’ income now spent on food

With real incomes continuing to contract in Russia in the midst of an ongoing economic slump, spending on foodstuffs is taking up an increasing part of the average citizen’s budget.

For the first time in eight years, food and alcohol, along with tobacco products, were the main part (50.1 percent) of Russia's retail turnover in February 2016. The Institute of Social Analysis and Forecasts at the Russian Presidential Academy of National Economy and Public Administration which prepares monthly monitoring reports of the population's socio-economic situation and wellbeing published this statistic. The earlier "record" was set in May 2009, when the share of food products reached 49.6 percent of retail turnover.

"Currently there is growth in the population's spending on food, which logically reflects the fact that real income has decreased and poverty has increased. It is known that the poorer the household, the higher the part of the budget that it spends on food," say the report's authors.

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The Institute calculated that, in February 2016, Russians' real income had declined by 6.9 percent and real salaries had declined by 2.6 percent compared to the same period in 2015. The poverty level by the end of 2015 had increased by 2.2 percent to 13.4 percent.

The monitoring report found that 50 percent of people have seen a decline in living standards, consequently resulting in a reduction of consumer activity. Both low-income and medium-income classes have begun to economize.

The number of poor Russians who had begun economizing on goods and services by March 2016 had increased to 89 percent, while the number of middle class people who were cutting back on their spending had grown to 79.3 percent. Of the Russians surveyed, 55.8 percent said they were ready to cut out non-essential goods they were used to buying.

"Besides buying food, Russians must make monthly payments to cover their debts, mortgages and other financial commitments. In such cases the majority of Russians either cut back on buying cars, expensive electronics, furniture, etc., or don’t buy them at all," said Natalya Kolupayeva, senior analyst at Raiffeisen Bank.

The report by the Institute of Social Analysis and Forecasts stated that people were mostly pessimistic in their evaluation of the economic situation: "The light at the end of the tunnel is moving farther away."

One of the report's authors, Maria Ivanova, said in the course of the year, the share of Russians' budgets occupied by food products may increase.

"The reasons will be the same: The continuing reduction of the population's real income and consequently, priority consumption of essential goods,” she said.

First published in Russian in Kommersant.

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