Andrey Ostroukh
Russia's economy has avoided the meltdown many predicted after Moscow sent its forces into Ukraine six months ago, with higher prices for its oil exports cushioning the impact of Western sanctions, but hardships are emerging for some Russians.
After predicting at one point that the economy would shrink more than 12% this year, exceeding the falls in output seen after the Soviet Union collapsed and during the 1998 financial crisis, the economy ministry now expects a 4.2% contraction.
High global energy prices have helped the Kremlin follow through on President Vladimir Putin's pledge in March to reduce poverty and inequality despite crippling Western sanctions and inflation. Some economists have compared the situation to the COVID-19 pandemic, when authorities increased payments for those most vulnerable to the crisis.
"So far, there are no signs that the drop in living standards could lead to unrest," said Alexei Firsov, founder of social studies think tank Platforma.
"The living standards decline has not reached the point where attitudes towards reality start to change significantly and the fridge clearly begins to beat the TV" - a reference to a Russian saying that describes the tension between people's experiences and what state television has led them to expect.
Russia's current account surplus - the difference in value between exports and imports - more than tripled year-on-year in the first seven months of 2022, to a record $166.6 billion, as revenues soared while sanctions caused imports to plunge.
Putin has ordered 10% rises in pensions and the minimum wage to soften the blow from inflation, while major employers such as No.1 lender Sberbank (SBER.MM) and gas giant Gazprom (GAZP.MM) raised salaries from July. read more
The unemployment rate was 3.9% in June, its lowest since the statistics service started publishing the figure in 1992, according to the Eikon database.
Putin's approval rating was 83% in July, up more than 10 percentage points since the Ukraine campaign started on Feb. 24, according to the independent Levada Centre polling.
Cost of living
Inflation, which soared to a 20-year high of 17.8% in April after the rouble collapsed to a record low against the U.S. dollar, is now seen ending the year at 13.4%, according to the economy ministry.
Emergency capital controls have since helped the rouble firm more than 25% this year, making it the world's best-performing currency so far in 2022. That has helped rein in inflation and stopped the panic-buying seen after sanctions were imposed by Western countries.
While sanctions mean consumer goods like Guinness beer, Zara clothes and Nespresso coffee capsules have disappeared from the shelves, some Russians told Reuters they were also struggling to find staple goods including some medicines.
Some complained about a shortage of car parts as many Western manufacturers have either suspended operations or left Russia entirely. read more Russia's biggest carmaker Avtovaz (AVAZI_p.MM) has cut production and is offering some workers voluntary redundancy due to lack of components. read more
"As a retired person, I cannot afford what is on offer. Prices for the products I buy have jumped by 30% on average," said Larisa, a 65-year-old pensioner from Belgorod, a city near the Ukrainian border.
Official figures show consumer prices have gone up 10.7% so far this year, compared with a 4.7% increase in the same period of 2021.
But according to statistics service Rosstat, prices for sanitary pads have risen 41% year-to-date, those for foreign-made cars are up 39%, and toilet paper prices are up 27%. read more
"I've started to spend more, but I've also started to save more," said Tatiana Lazar, a 33-year-old confectioner and mother of two from Moscow. "Now I limit my desires, my wants in shops and in the standard of living. I don't really believe that prices will go down."
Putin has promised for years to raise real disposable incomes, a measure of people's purchasing power, but a survey by state polling agency VTsIOM showed that 64% of people in Russia had no savings as of mid-February.
Online project Pricing.day, which tracks consumer goods prices, warned living standards could yet fall further, saying: "The economy has collapsed and shortages of even basic products are on the way."
But for many Russians, the last six months have seen little change: they still holiday abroad, buy Western goods, complain about inflation, watch TV and support Putin.
And with energy prices set to remain high even as European Union countries try to wean themselves off Russian gas and oil, state coffers should continue to swell. read more Russia has said it plans to reinstate its policy of topping up reserves with excess oil revenues.
"People relax, go to eat, go out, spend money just as they did before," said Emil, 33, who lives in Moscow.
"I think everything has normalised, more or less, given how they (the West) wanted us to live ... I don't think it'll be us having the cold winter."
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