The debts of Russians exceeded 30 trillion: experts spoke about the risks to the economy

This is the size of the annual budget of the Russian Federation

The total debts of Russians in April exceeded the astronomical amount of 30 trillion rubles. For comparison: the size of the budget of the Russian Federation for 2023 is almost 1 trillion less. That is, if Russian citizens suddenly paid off all their debts at once, then with this money the country could live with a margin for a whole year. But “suddenly” it will not work out: the debt burden of the population is growing at an alarming pace and promises great financial troubles for both numerous debtors and the country’s financial system as a whole.

The first months of 2023 showed that the Russians really do not have enough money. As a result of April, the total debt to banking organizations of the population increased by 13% compared to January-April last year. Roughly speaking, in order to satisfy their consumer interests, citizens had to borrow about another 527 billion rubles. As a result, the financial obligations of ordinary Russians to credit institutions amounted to 30 trillion rubles, which exceeds the annual expenditures of the federal budget.

Moreover, the pace of increasing the debt of individuals and do not think to be slowed down. Based on the monitoring of the consulting company Frank RG, at the end of May, domestic banks provided loans to Russians for a total of 1.41 trillion rubles. This is a record: in comparison with the first five months of last year, the money appetite of Russians has grown one and a half times. “Citizens provided with permanent work,” says Mikhail Belyaev, Ph.D. in Economics, financial analyst, “began to think about improving their own well-being. In the absence of accumulated funds, many prefer to seek money in loan organizations, whose managers are ready to offer loans almost on a telephone request. If we consider the debt issue of the population from a broad economic position, then this trend looks positive.” According to the expert, the growth in lending (and hence debts) indicates an increase in consumer demand, which ultimately leads to the growth of the country’s economy.

Indeed, according to the forecast expectations of the head of the Ministry of Economic Development Maxim Reshetnikov, the real incomes of Russians in 2023 will grow by 4%. “Consumer demand is based on the growth of real incomes of the population. All major components will grow. First of all, it is wages. We think growth will be at least 5.4% in real terms,” the minister said at a recent meeting with President Vladimir Putin.

However, so far these are only good forecasts. And according to the latest official data, the real disposable income of the population decreased by 1% over the year after rising by 3.2% a year earlier. “People are taking out more and more loans, hoping for financial stability in the future,” Belyaev believes. “In general, this is useful for the economic well-being of the country, since it is high consumer activity that should become a positive guarantee for the development of our national economy in the coming years.”

Perhaps this mass “life on credit” will benefit the economy. And what about the citizens who have hung a credit yoke around their necks? As the leading expert of the Center for Political Technologies Nikita Maslennikov reminds, the life of the ordinary population in debt can hardly serve as a basis for strengthening the financial situation of both present and future generations. Most people take out loans expecting to pay off the interest from a future pay rise. But this requires sustainable economic growth in the country, which is not yet available. As a result, both banks and borrowers are driving themselves into a kind of financial trap, the expert says.

Where it leads? Banks will have to increase interest on future loans, which will make it difficult to issue them, and debtors, that is, ordinary people who bought into advertising offers to get a cheap loan, will be forced to pay off their last savings to pay off monetary obligations without increasing wages. “Perhaps if all Russians paid off their credit debts, then the federal budget would not experience a deficit of 3.5 trillion rubles,” says Maslennikov. “True, no one will benefit from such a financial redistribution: the inhabitants will be left without available funds, and the banking system will lose the opportunity to lend not only to the population, but also to industrial enterprises.”