Russians disinclined to save
21 Feb, 2007 07:17
Russia's consumer boom is never far from the headlines, but savers get less attention. Meanwhile, the number of those willing to salt away their cash for a big purchase in the future is in short supply.
Researchers from Russia's Deposit Insurance Company say the number of people with money available to save declined by one third last year. That's even though incomes increased. It begs the question: where did the money go? Financial experts say it's simply spent.“For the first time in many years people have an economic opportunity to satisfy their needs which has resulted in an obvious tendency: once they get additional income, they start spending more actively. Bank credits became more available. And people have optimistic expectations for Russia's economy,” explains DIC’s Andrey Melnikov.While the Russian economy is booming, consumer spending has for the third year in a row exceeded income, and borrowing is becoming a habit.“This ratio of people who are willing to take a loan is growing. A year ago that was somewhat 10%, right now it's somewhat 15% and it’s still growing. I expect this ratio to be 30% in the nearest two years. Every year the retail loan portfolio is doubled,” says Aleksandr Sherstyukov, Bank of Moscow Executive Director.Savings institutions are not banking on depositors queuing at their doors in the near future, as most Russians still cannot accumulate enough capital. Analysts blame a combination of moderate wages and a growing consumer economy that encourages most people to spend.Also, low returns on bank deposits combined with low financial literacy means people are likely to borrow for today, rather than save for tomorrow.