Spending is high and debt is low in Russia, despite concerns that Europe’s financial problems may spill over into the country, and Russian retail centers have seen a significant amount of traffic.
Russian consumption of Western luxuries has soared, driven primarily by rising consumer credit, even though the rest of the economy is not faring well, Russia Now reports.
In October, Russia’s retail lending growth grew to 43 percent year-on-year. First Deputy Chairman of the Central Bank of Russia Alexei Ulyukayev said that when consumer-lending rises above 28 percent, the economy is in danger of “overheating,” according to The Moscow Times.
The nation’s unemployment rate is at an 20-year low of 3.8 percent. Russian President Vladimir Putin said in June that the low unemployment rate indicates that production capacity has been expended, Russia Now reports.
Wages, meanwhile, grew at an annualized 14 percent at the end of the first quarter of the year, and Russia’s development ministry said wages are expected to rise 3.7 percent in 2013, according to ZeeNews.com.
Following the collapse of a number of banks during the recent financial crisis, the Kremlin bailed out the nation’s troubled banks and bolstered state-owned firms to protect the population from the fallout.
Additionally, the state granted citizens apartments in 1991, so the average Russian citizen’s income is disposable. Retail growth increased in October, despite predictions by economists that retail growth would slow down in the second half of the year.
The increase in consumer borrowing is also having an impact on economic sectors related to shopping, including supermarket chains, most of which are reporting 2012 revenue growth of up to 33 percent year-on-year, according to Russia Now.
Data from the Association of European Businesses revealed that auto sales in Russia grew 13 percent since last year, and the nation is poised to become the largest European car market within the next five years.
Consumer spending has also contributed to an increase in commercial property investment. In November, Moscow was ranked by professional property services company Jones Lang LaSalle as the third most desirable investment area in Europe.
“Within the coming years, the high level of disposable income and the rapidly growing middle class will make the Russian retail market one of the European leaders in terms of turnover,” James Brown, the head of Jones Lang Lasalle’s Europe, Middle Eastern and Africa retail consulting and research division, said, Russia Now reports.