Staunton, January 10 – Like people in many societies confronted with falling incomes and rising expenses, many Russians are going into debt in order to try to maintain their standard of living, with some taking on so much consumer debt that they have landed in the position of debt “slavery.”
A new study says that 9.9 million Russians now must pay 80 percent or more of their incomes to service debt, an unsustainable amount that likely will lead to their assumption of even more expensive forms of debt, greater debt burdens, and ultimately bankruptcies (finanz.ru/novosti/lichnyye-finansy/pochti-10-millionov-rossiyan-okazalis-v-rabstve-u-bankov-1028807909).
That is the extreme case, of course; but the Fitch Agency study says only 20 percent of the nearly 54 percent of Russians with consumer debt now have payments equal to less than 30 percent of their incomes, the figure the agency says is sustainable. The rest are paying more (rbc.ru/finances/10/01/2020/5e175d579a79474378078a06?from=from_main).
This rising consumer debt burden has two consequences, one for individuals and a second for Russia as a whole. For individuals, it means that ever more Russians can’t afford to buy anything because their incomes are entirely committed to basic needs and servicing debt (romir.ru/studies/rossiyane-ne-jdut-rosta-blagosostoyaniya-v-blijayshie-10-let).
And for Russia as a whole, it means the Kremlin is unlikely to take measures necessary to get the economy moving. According to Stanislav Murashov of Rayffayzenbank, overcoming this debt requires economic growth, “but there are almost no hopes of that: the government has other priorities” including extracting money from the budget for its wealth and saving for future crises.
“Under conditions of external tension,” he says, “the Russian authorities are hardly likely to move out of the ‘defensive’ regime they have adopted; and without this, the acceleration of the economy is impossible.”