HomeWorldRussia in freefall: 500k workers forced to slash hours as wages PLUMMET in business exodus
Russia in freefall: 500k workers forced to slash hours as wages PLUMMET in business exodus
August 14, 2022
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People in the country are also having to settle for poor-quality substitutes for western goods, according to Natalia Shapoval, Vice-President of the Kyiv School of Economics. Ms Shapoval stressed Putin was doing his best to conceal the harsh reality from the Russian people wherever possible.
Her report, entitled Impact Of Sanctions On The Russian Economy, suggests real wages in the Russian Federation fell by 6.1 percent, while in April the drop was even worse -7.2 percent. The recorded fall in real income was at its highest level in the last seven years.
The report adds: “Russians became more impoverished only in 2015, after the annexation of Crimea and the first Western sanctions and the fall in the oil price, which triggered a collapse in the RUB and a rise in inflation.”
Ms Shapoval told Express.co.uk: “The real wage is falling merely with price increase.
“But other factors include the exit of foreign companies resulting in less working hours and lower average wage; significant reduction in production in some indicators (auto, transport etc).
Russian President Vladimir Putin, whose country is under intense economic pressure (Image: GETTY)
Shoppers queue outside on of H&M stores in Moscow, with the company pulling out of Russia (Image: GETTY)
“Yet, some industries decreased average wages too – for example, production of furniture, electronic equipment etc.”
She added: “We also observe an increase in competition for vacancies on the job search websites.
“More than 492,000 people (estimated based on a sample of workers working in international companies) are likely to be working fewer hours.”
Russians were already feeling the reduction in their quality of life, although not necessarily the effect of the real wage drop.
Vladimir Putin ordered his invasion of Ukraine on February 24 (Image: GETTY)
Volodymyr Zelensky, Ukraine’s President (Image: GETTY)
“At least before the number of dead soldiers gets very high and Putin tries to force military mobilisation in regions closer to Moscow.”
Ms Shapoval’s gloomy prognosis was backed up by preliminary data from Russia’s federal statistics service Rosstat on Friday indicating the country’s economy shrank 4.0 percent year on year in the second quarter of 2022.
The economy is plunging into recession after Moscow sent its armed forces into Ukraine on February 24, triggering sweeping Western restrictions on its energy and financial sectors, including a freeze of Russian reserves held abroad, leading scores of Western companies to quit the market.
Rosstat did not provide any further details but analysts said the contraction had been caused by weakness in consumer demand and the aftermath of sanctions.
Sergey Konygin, an economist at Sinara Investment Bank, said: “June data suggests the contraction in the Russian economy seems to have bottomed out as the situation in some industries is stabilising.”
However, the second-quarter contraction in gross domestic product was not as deep as expected, with analysts on average forecasting GDP would shrink seven percent year-on-year in April-June after expanding 3.5 percent in the first quarter.
The central bank’s analysts had expected GDP to contract 4.3 percent in the second quarter, saying it was on track to fall seven percent in the third quarter. The central bank projects the economy will start recovering in the second half of 2023.
Given the highly volatile political environment, official forecasts for the depth of Russia’s recession vary.
Vladimir Putin factfile (Image: Express)
The economy ministry said in April that gross domestic product could fall by more than 12 percent this year – after growth of 4.7 percent in 2021 – in what would have been the biggest contraction since the mid-1990s.
But forecasts have softened since then as Russia pushes back against restrictions.
The central bank predicted in April that GDP would shrink eight to ten percent, but last month revised that to forecast a four to six percent contraction.
Central bank deputy chairman Alexei Zabotkin commented: “GDP contraction will reach its bottom in the first half of 2023. The economy will move towards a new long-term equilibrium.”