Russians increase savings and bet on cash

Russians increase savings and bet on cash

In 2020, pandemic-related restrictions and an unstable economic situation prompted Russian citizens to build their savings up. Moreover, the share of cash holdings increased to 29% last year indicating grim expectations about the future.

Russians’ household savings more than doubled last year despite a fall in disposable incomes and a rise in unemployment, says The Moscow Times. Russia’s Federal State Statistics Service revealed that the population’s total savings jumped more than 2,2 times to 5,2 trillion rubles ($70 billion) at the end of 2020. This is in line with the global trend of spending less and saving more during the pandemic.

Although economists consider the increase in savings to be a consequence of pandemic-related lockdown, when it was physically difficult to spend money, experts warn that a higher savings rate should not be seen as a sign of economic strength. Household consumption dropped by 8,6% in 2020, while real disposable incomes lost only 3%. Discretionary spending decreased, as people self-isolated, worked from home and abandoned their traditional leisure activities.

However, experts point at an increased proportion of savings being held as cash. According to Natalia Safina, head of macroeconomic analysis at the Moscow-based Center for Strategic Research, it suggests nervous expectations for the future. 'This supports the idea that the reason for the increase in savings is not a growth in prosperity but rather an uncertainty in the future, which has forced people to tighten their belts and build up a financial safety net,' she said. Record-low interest rates have also helped to increase the attractiveness of cash as an option for short-term savings compared to bank deposits.

Discretionary spending decreased during the spring’s lockdown, as people self-isolated, worked from home and abandoned their traditional leisure activities. Photo: Maksim Platonov

Russians’ disposable incomes have fallen by more than 10% since 2013, and consumer confidence is currently at its lowest level in five years. In 2020, inflation rose to almost 5% on the back of surging food prices and the fall in the value of the ruble. As for the country’s anti-coronavirus support package, it was rather modest last year, and budget plans suggest that the government will cut spending rapidly to return to minimal budget deficits. Reuters stated last week that the Kremlin was considering an additional spending package in the run-up to September’s parliamentary elections, but later, President Putin’s Press Secretary Dmitry Peskov denied this report. '[...] there are no one-off payments due to be announced soon,' he said.

By Anna Litvina