Alexey Vedev, Senior Researcher at the Gaidar Institute’s Financial Sector Department stated in a comment for RBC
that the current trend in consumption in Russia poses additional risks to the economy. According to him, household incomes and consumer activity are growing faster than labor productivity and output, which disrupts the balance of economic development.The economist noted that increased consumption is a positive factor in itself, but its sustainability depends on the economy’s ability to ramp up production. If domestic demand continues to grow faster than the supply of goods and services, businesses face rising costs, and the accumulated imbalances may eventually have a negative impact on economic growth rates.
“Today, labor productivity and industrial output are barely growing, while wages and consumption are rising significantly faster. This gap creates risks for the economy, as demand begins to outpace production capacity. At certain times, this imbalance was offset by high oil and gas revenues and the redistribution of resource rents, but this cannot be a long-term solution. For sustainable development, growth in household incomes must be accompanied by comparable growth in labor productivity and gross domestic product,” emphasized Alexey Vedev.