Pensions, benefits, housing and communal services tariffs in 2024: “The poorest segments of the population will suffer”

Old age and military pensions

Pensions of non-working pensioners will increase by 7.5% next year and their average amount will be 23 thousand 244 rubles, as Finance Minister Anton Siluanov said, presenting the country’s draft budget in the Federation Council. At the same time, the total cost of pension indexation next year will amount to almost 600 billion rubles.

It also became known how much military pensions will increase next year. According to current legislation, military pensions are a certain percentage of the salary for military position and rank. By the beginning of 2024, this figure should be 85.47%, and from October 1 – 89.32% of the salary. Thus, in October next year pensions will increase by 4.5%.

Commented by Lyudmila Ivanova-Shvets, associate professor of the Russian University of Economics. G. V. Plekhanova:

“As you know, there is never too much money and senior citizens would like a larger increase – this is understandable! But taking into account the current situation in the country, I believe that the indexation of old-age pensions by 7.5% is quite worthy. You can see the dynamics. In 2022, pension indexation was carried out twice; it exceeded the inflation rate by 2%. And in September, the Central Bank published data: inflation in the country was 5.5%. That is, 7.5% gives a difference of the same 2%. True, by the end of the year consumer prices usually accelerate. But if the planned indexation lags behind real inflation, the government may carry it out again next year. At the same time, according to statistics, the percentage of people who live only on pensions and who have nowhere to expect help except from the state is not very high – 10%. The rest of the pensioners either work or rely on the support of family and friends.”

Matkapital and other social benefits

The amount of maternity capital, which more than 4 million families receive, will be indexed from February 1, 2024 to the inflation rate of the current year 2023 – that is, by 7.5%. For these purposes, according to Anton Siluanov, 1.6 trillion rubles have been allocated in the budget .

The Ministry of Labor also announced an increase in temporary disability and maternity benefits for working Russians. The maximum amount of temporary disability benefits will increase from the current 83 thousand to 122 thousand rubles per month. Payments for pregnancy and childbirth will increase to 565 thousand rubles against the current 383 thousand, and benefits for child care under the age of one and a half years will rise to 49 thousand rubles per month, now it is 33.2 thousand. In total, for payments for sick leave, pregnancy, The budget allocates 1.2 trillion rubles for childbirth and childcare.

Andrey Loboda, economist, director of communications at BitRiver, comments:

“Maternity capital is, one might say, the main feature of government assistance to families with children. Many foreigners coming to Russia are surprised that Russians have the opportunity to receive such help. Considering that the amount of maternity capital for families with two or more children is quite large, indexation, in turn, will also be quite large. Meanwhile, this is a significant expense item for the budget. It is important that in the context of sanctions and pressure on the Russian economy, the state continues to develop this support, increasing the size of maternal capital by 7.5%. This speaks to the resilience of our economy in the face of challenges and the government’s clear intention to follow the idea of ​​developing and strengthening social support for citizens. Matkapital, given the flexibility of its use, remains extremely in demand among Russian families with children.”

Inflation rate

The Ministry of Economic Development expects the annual inflation rate in Russia to be 4.5% by the end of 2024. It is noteworthy that for this year the department planned an indicator of 7.5%. Therefore, in 2024, price growth should slow down significantly.

Natalya Milchakova, leading analyst at Freedom Finance Global, comments:

“In our opinion, this inflation forecast will be achieved in 2024. An increase in budget revenues and a reduction in the budget deficit are factors that will have a positive effect on the ruble exchange rate. A more stable ruble in 2024 than this year may cease to be a factor generating price increases, as is happening this year. Also, the high key rate of the Central Bank of the Russian Federation should play a positive role, which by the end of this year may further increase – from 13% to 14%. A high key rate will have a positive effect on reducing inflation, and the population will benefit from this, first of all. But, on the other hand, with a high key rate, we won’t have to wait for super-high GDP growth rates.”

Exchange rate and oil price

According to the base scenario of the Ministry of Economic Development, the average annual dollar exchange rate in 2024 will be 90.1 rubles, which is almost 5 rubles higher than the forecast level for 2023 (85.2 rubles). Interestingly, by June 2024, the Ministry of Energy expects a peak in the strengthening of the ruble – up to 87.5 per dollar. “The forecast for the dollar exchange rate is affected by changes in the structure of foreign trade settlements, in particular, the increase in the share of the ruble and national currencies in settlements,” the ministry clarified.

In many ways, government forecasters associate the upcoming strengthening of the ruble with an increase in the price of raw materials. Thus, the average annual price for Brent oil in 2024 will be $85 per barrel.

Natalya Milchakova comments:

“Apparently, the government in 2024 will consider the optimal corridor for the dollar exchange rate to be 85-95 rubles. And there is a fairly good chance that the dollar may fluctuate in this corridor all year, and then the forecast of the average annual dollar exchange rate will be feasible. For both business and the population, what is important is not so much an expensive or cheap ruble, but rather a predictable exchange rate, without sudden jumps. Next year we do not expect such sharp jumps, both in the direction of a collapse and in the direction of a sharp strengthening of the ruble. A Brent oil price of $85 per barrel will be quite optimal for the budget, and, most likely, the average price of the Russian Urals export grade will be in the range of $70-75 per barrel, that is, with a fairly small discount to Brent and above the “price ceiling.” In our opinion, it would be advisable for the government and the Central Bank of the Russian Federation to establish some optimal corridor for the dollar exchange rate (for example, the same 85-95 rubles per dollar) and regulate its upper and lower limits. Such a currency corridor, in our opinion, can suit everyone.”

Housing and communal services tariffs

Indexation of the total payment of citizens for housing and communal services in the Russian Federation from July 1, 2024 will be up to 9.8%. This is stated in the government forecast of socio-economic development of the Russian Federation for 2024-2026.

Moreover, for certain municipalities, the indexation amount may exceed the established index for the constituent entity of the Russian Federation, taking into account the implementation of investment programs, compliance with long-term tariffs under concession agreements, the implementation of integrated development programs for territories, and a number of other factors. Indexation of housing and communal services tariffs in mid-2024 will be carried out after a one and a half year break. A year earlier, the Russian government postponed the indexation of tariffs for gas, electricity transmission, water and heat supply from July 1, 2023 to December 1, 2022, setting the indexation limit at 9%.

Andrey Loboda comments:

“It’s amazing that the government with a light heart has drawn up a budget in which housing and communal services will out of the blue increase by almost 10%. The majority of the population studies monthly payments for apartments with anxiety and disappointment. There was no trace left of the sums of several thousand rubles for a modest two-room apartment. Utilities are becoming more expensive year after year, and the only way to stop the growth is to return to a strong ruble and low inflation. Then there will be no need to disappoint the population with a tariff race and seek compensation for the poor. Next year, rent in large Russian cities will increase by 500 – 900 rubles per month, depending on the square footage and class of real estate. This means that the minimum payment for a small apartment will exceed 6,000 rubles. Such an increase in utility bills does not bring anything good to people’s lives; again, the poorest segments of the population will suffer.”