Jens Asbjørn Bøgen
Things are going from bad to worse for the Russian economy at the moment.
Russian consumers are pulling back over the Christmas period as the economic surge triggered by the invasion of Ukraine shows signs of exhaustion, Business Insider reports, citing a report from the Central Bank of Russia.
What was once a rare moment of rising incomes is giving way to caution, according to official assessments.
The shift comes as the war nears its fourth year and pressure builds on both households and the state budget, weakening confidence in future earnings and spending power.
Pullback in demand
The central bank said fewer people are buying expensive, non-essential goods, a sharp contrast to the spending boom seen two years ago.
The cooling trend suggests a broader economic recalibration after a period of overheating.
“More subdued consumption may indicate a gradual reduction in labor market overheating and more moderate expectations for future income dynamics,” the report added.
This slowdown in household demand has coincided with mounting pressure on state finances, particularly from falling energy income.
War-driven surge
Following the 2022 invasion, Russia’s economy was reshaped by sharply higher defence outlays and labour shortages caused by mobilisation and demographic decline.
Fierce competition for workers pushed wages higher, giving many families room to spend more freely than before.
That momentum has now slowed. According to Business Insider, Russia’s central bank said wage growth has flattened and labour demand has cooled, reducing consumers’ appetite for discretionary purchases.
Retailers reported a clear change in buying patterns, the bank noted.
“According to retailers across the country, an increasing share of products are being purchased during promotions, sales, and discounts,” the report said according to Express. “Household behavior has become more frugal.”
Energy revenue hit
Oil and gas sales remain critical to funding Russia’s war effort and supporting domestic spending without triggering high inflation or a currency shock. But official data shows those revenues are weakening.
According to The Moscow Times, Russian government figures indicate oil and gas income dropped 34% year-on-year in November, tightening the fiscal environment as military costs remain elevated.
Sources: Russian central bank, Business Insider, Express
