Russias 2022 economic fall seen in lower incomes, slumping consumer demand

MOSCOW (Reuters) – Russian consumer demand contracted at its fastest pace in seven years in 2022 and real disposable incomes fell, data released on Wednesday showed, as the countrys population felt the effects of its dimming economic prospects.

Russias export-dependent economy has withstood the impact of sanctions better than first expected, but still suffered a GDP contraction of around 2.5%, as the West imposed restrictions in an effort to punish Moscow over its actions in Ukraine.

Although its economic outlook this year is not so gloomy, Russia faces a labour market shortage, lower oil and gas revenues as price caps and embargoes kick in, as well as a sharply widening budget deficit, 2023 looks set to present new challenges for the government.

Real disposable incomes fell 1% in 2022, preliminary data from the Rosstat federal statistics service showed. Real wages, which are adjusted for inflation, rose 0.3% year-on-year in November, just the second positive reading since March.

Retail sales, a key gauge of consumer demand, slumped by 6.7% in 2022, the poorest showing since 2015, while in December they were down 10.5% year-on-year, the worst monthly performance since May 2020 and the height of the coronavirus pandemic.

Unemployment remained at a record low 3.7% in December, matching the figure for November.

Top government and central bank officials have highlighted concerns about the economic impact of a tight labour market since President Vladimir Putin ordered a “partial mobilisation” of mostly working-age men in late September for what Russia calls a “special military operation” in Ukraine.

Hundreds of thousands of Russians fled the country when the mobilisation was announced, while around 300,000 were drafted into the army.