Russian economy surges as real wages and spending boom
Despite expectations, the Russian economy is experiencing a rise in consumption and real wages. According to the Financial Times, Russians have more disposable income and are eager to spend it, driving a consumption boom. This phenomenon is a result of increased government spending and labor market shortages.
According to data from the Russian statistical agency Rosstat, real wages in Russia have increased by nearly 14%, and the consumption of goods and services by about 25%. This is a significant change compared to the beginning of the invasion of Ukraine in 2022 when many entrepreneurs feared an economic collapse.
Wage growth is visible across various sectors of the economy. Workers who were earning the equivalent of $250-$350 per month in December 2021 can now expect up to $1,400. There are many such examples of "spot" increases. The average salary for long-haul truck drivers has increased by 38% year over year.
Boom in consumption drives the economy
Rising wages translate into increased consumer spending. Russians are eager to spend money on domestic tourism, dining out, and durable goods.
The boom is also evident in the real estate sector. Sergei Skatov, an expert on the Russian real estate market, notes that "developers can sell nothing all year and still be profitable. They have already sold everything they can build in the next three years."
The increase in consumption is also noticeable in the luxury sector. One Moscow resident reports that he and his wife keep a list of luxury vehicles spotted in front of their exclusive apartment complex. A neighbor boasts of pictures of his pet lion.
War economy fuels consumption boom
The consumption boom is largely driven by government spending, particularly in the defense sector. The Russian central bank also points to government expenditures as the main driver of GDP growth.
Another concern is the labor shortage. As a restaurateur from St. Petersburg highlighted in an interview with the Financial Times, staffing shortages are enormous. "There are no chefs, waiters, bartenders; many people from the service sector have left," he explains. This could mean that the potential limits of economic growth in Russia are already becoming apparent.
