Staunton, July 28 – The economic situation of the large number of Russians who have sought to maintain their earlier standard of living by taking out loans is about to get much worse, financial analyst Igor Nikolayev says, because in the coming months, the government plans to make it more difficult for them to get new credit or cover payments on their existing loans.
That will force many who have not had to make significant cutbacks up to now, the director of the FBK Institute for Strategic Analysis says, to do so, not only reducing spending on vacations and durable goods but even on the most immediately necessary consumer goods (ura.news/articles/1036278541).
And the time when that will happen is approaching very fast. “Already in the fall, the government will be tightening conditions for offering credit, a move that means that bank loans will become less acceptable. As a result,” Nikolayev says, “people will have to cut back on current consumption,” something many have avoided up to now.
URA journalists Mikhail Bely and Leonid Fedorov report on where Russians have cut back already and where they are likely to cut back still further when they can no longer live on credit as many have been doing the last several years. They report that declining incomes and the credit crunch are hitting the economy across the board.
Russians have significantly cut back on visits to restaurants and purchases of flowers. They are no longer travelling abroad as much but rather going to dachas or staying home. They aren’t purchasing apartments for cash but relying on mortgages and now in a new record for Russia, almost 60 percent of all cars sold are being bought on credit.
Most strikingly, Russians are actively cutting back on expensive foods and drink as well as on consumer goods. And this has led to a sea change in behavior that is not likely to be reversed quickly even if the economy should turn around, Ivan Fedyakov of the INFOLine Analysis Agency says.
Initially when the slump began, people thought that it was something temporary and chose to live on credit. Now they see that it is likely to last a long time and are cutting back their spending in case things get worse, he says. That will make getting out of the slump more difficult because consumer spending in that event won’t rise as fast as many had hoped.