Between 2000 and 2008 real wages recorded average growth of over 12% a year. This rapid rise was made possible on the one hand by healthy corporate earnings growth, but also by the oil revenues gushing into Russian state coffers, enabling the state – still an important employer – to ratchet up wages and salaries in the public sector. But these days have come to an end, at least for the time being: companies are feeling the heat of the crisis and government revenues are collapsing while spending continues to rise. In 2009 we expect a budget deficit of 8% of gross domestic product (GDP).
Russia: Real wages declining for the first time since the Russian crisis 1998
In July real wages recorded the sixth decline in succession. Compared to the previous year, the reduction panned out at just under 6%. On average real wages are expect to tumble by 5% in 2009, the first decline since the Russian crisis 1998. The attendant weak development in private consumption is also one of the main reasons why Russian economic output will shrink far more sharply than that of other major emerging markets. In countries like Brazil, for example, consumption has still managed to expand moderately, in spite of the crisis, and thus offset at least partially the collapse in investment. This is not so in Russia's case: both investment and consumer spending are currently on a clear downward slide.
This year Russian GDP is expected to contract by 8%, steeper even than in 1998, the year in which the Russian state defaulted. In 2010 we expect consumption to revive only marginally, limiting the recovery potential of the economy. We are penciling in real GDP growth of 2.5%.
Gregor Eder
tel.: 49 / 69 / 2 63 – 5 33 58
e-mail: [email protected]