Russians Struggling to Survive Add Pressure to End Lockdown

(Bloomberg) -- Grigory Sverdlin has been doling out free meals from a night bus in Russia’s second-biggest city for the best part of the past two decades. Rarely has he seen so much demand as in the past few weeks.

“In St. Petersburg we usually feed around 80 people a night at each of the four stops. Now there are 120-140 people every evening,” said Sverdlin, who started as a volunteer at the Nochlezhka charity in 2003 and is now director. “There’s just a huge number of people right now who are out of work and on the street, or in a very difficult financial situation.”

Russians are running out of money after six weeks of lockdown and minimal government support, adding to pressure that pushed President Vladimir Putin to start reopening the economy even as the infection total surges to the second-highest in the world. Putin announced the end of a national stay-at-home period on Monday, and Moscow and other major cities are slowly beginning to loosen restrictions.

Almost half of Russians have either no savings or just enough to cover them for the next four weeks, a survey by Moscow’s Centre for Strategic Research published this week showed. About a quarter of the population has had to spend reserves since the start of the lockdown to cover a drop in income, according to the central bank.

“The situation with incomes has become pretty dreadful,” said Dmitry Dolgin, an economist at ING Bank in Moscow. “Pressure will increase either to ease the lockdown or ease fiscal policy.”

The government has $165 billion stashed away in a rainy-day fund, but it’s been reluctant to spend too much on economic stimulus in case the situation worsens due to the plunge in global demand for oil, Russia’s main export earner. Real disposable incomes are set to drop this quarter to levels not seen since 2006, according to Bloomberg Economics.

Putin announced new measures Monday, including payments to families, tax write-offs and new salary loans, but Dolgin estimates that the total stimulus still only accounts for about 3%-4% of gross domestic product, a fraction of what other countries are spending.

The stimulus will soften the plunge in incomes this quarter by just 2 percentage points, while still leaving a 20% drop uncovered, according to Moscow’s Higher School of Economics. Almost half of Russians polled in the central bank’s April survey said they had cut back spending on goods and services, including on food. A government website was swamped this week as more than two million applications were filed in the first day for the new one-time payments of 10,000 rubles ($136) per child that Putin announced.

What Our Economists Say:

“Real incomes had only just begun to recover from the last crisis. Without more generous support, households will bear the brunt of the pandemic shock, and that will mean another painfully slow recovery.”

-- Scott Johnson, Bloomberg Economics

The rise in poverty is weighing on Putin’s popularity ratings, which slumped to an all-time low of 59% earlier this month. The economy is forecast to contract by 5.5% in 2020, almost double the global rate, while a recovery next year will be slower than elsewhere, according to the International Monetary Fund.

Russian officials say the easing of the lockdown should soften some of the economic blow but they claim that the drop in incomes so far isn’t becoming a serious political problem or fueling a major increase in protest attitudes. The number of confirmed coronavirus cases rose to 252,245 on Thursday.

The Nochlezhka charity that Sverdlin runs has started organizing food handouts in Moscow to meet the increase in demand. In St. Petersburg, it’s doing the same from a repurposed entertainment venue on New Holland Island.

“For a few years after the economic crisis in 2014 there were lots of people in need,” Sverdlin said. “But this crisis is clearly more serious so the numbers will only increase in the coming months. I worry that numbers will double or triple by the autumn.”

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