IT engineers have been the most mobile part of Russia’s labor force: more than 30 percent of IT specialists have left the country in 2022. Some have been helped by their employers to relocate to countries on Russia’s borders. The law obliges companies whose employees have received military notice at their place of work to deliver them to the employees. But there are cases of employers transferring employees for whom they received subpoenas or have placed them on leave, while in fact such people continue to work while hiding from mobilization.
Exports
Another indicator of the overall economic downturn is the decline in non-oil and gas budget revenues. In October 2022 they were 20 percent lower than a year earlier. The decline in revenues is forcing the government to raise taxes, cut non-war spending, and resort to debt. In addition to sectors of the economy that work for the domestic market, the iron and steel industry may be in a very difficult situation. Exports are plummeting, and the companies are forced to export their metal at steep discounts.
Commodities, Real Estate, and Advertising
Owing to the uncertainties of wartime, private companies are reducing their investment programs. For example, Chernogolovka, a producer of soft drinks, froze its investment in new production facilities for 5 billion rubles, and Severstal refused to buy a new gas turbine. The City of St. Petersburg reduced from 55 billion to 30 billion rubles its planned investments in new subway construction in 2023. Budgetary support for investment in 2023 will decrease by 10 percent from planned levels, but priority programs, including spending on military equipment, will not be affected.
Contrary to the expectations of Russian officials, Chinese automobile manufacturers are not in a hurry to open assembly factories in Russia, and the Chinese government is buying out foreign shareholders' ownership in such projects. The new production facilities will be developed on Chinese platforms.
The advertising market is in dire straits. According to most advertising agencies, advertising will fall this year by at least half. The activity of small and medium-sized businesses, especially in trade and services, is visibly decreasing. Small businesses are actively cutting staff and investment.
After the mobilization was announced, the demand for new real estate in Moscow fell sharply, by 36–37 percent. Most developers have to offer discounts of 5−30 percent to keep up sales. And apparently this is just the beginning: in 2020–21 prices rose sharply because of the state’s mortgage subsidies. The supply of new construction in the market has reached a five-year high, and buyers are leaving the market. A prolonged recession will lead to financial problems for developers, and the state is unlikely to continue to support mortgages: the budget is facing increasing difficulties, and the proportion of people with bad loans is growing.
Banking
In the spring of 2022 the Russian Central Bank imposed a sharp increase in interest rates to stop inflation and keep the ruble from falling. This led to a reduction in mortgage lending (by 21 percent in amount and 36 percent in the number of loans). For the sake of preserving lending, banks had to sharply increase the proportion of mortgages for which the borrower could offer only a small (10–20 percent) down payment.
The economic downturn and mobilization fueled an increase in bad loans. For example, in September 2022, nonpayment on car loans increased by 19 percent over a month; 13 percent of such loans are now overdue. Mortgage arrears rose even more significantly, by 35 percent, during September. Increased uncertainty, lower incomes, the forced departure of wage earners abroad, and mobilization have made it difficult for citizens to service loans.
Against the backdrop of mobilization, banks have reduced issuance of loans in all segments of lending, which also contributes to an increase in the share of overdue loans. Mortgage refusals have risen particularly sharply: banks fear that borrowers will be sent to war and will not be able to service loans. The tightening of banks' policies for the first time since 2015 has led to a decrease in the total debt of the population to banks. However, the quality of loan portfolios is tangibly declining as mobilization and the economic downturn make previously issued loans problematic. The possible winding down of concessional mortgage programs will make a decline in housing prices inevitable.
In turn, borrowers are also becoming more cautious. Now they do not view their economic prospects as bright, and since July they have been reducing the average mortgage by about 6 percent (at VTB, in the more expensive housing segment, by almost a quarter). So far, starting in 2015, mortgage subsidies have accelerated home prices, and the average mortgage has risen 2.7 times since then.
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