The World Bank has recently warned that the poverty rate in Russia is rising sharply. The announcement comes as the country adjusts to falling oil prices and international sanctions which are having a negative effect on its economy, including a fall in real wages by more than 10%. When Russia saw its last economic downturn in 2009, the government dealt with the fallout quickly with social support handouts. But now it's thought there is not enough money in the government's budget to deal with the current economic crisis in the same way.
When the Russian Prime Minister visited Crimea in May he probably didn’t expect his reply to one angry pensioner to become the subject of a joke in his own country.
A song by a Russian comedian mimicking Medvedev’s awkward answer ‘there’s just no money, hang on in there’, became an instant hit among Russian internet users.
But jokes aside, Russia’s economy has been crippled by low oil prices and Western sanctions.
Global crude oil prices have seen a sharp decline since June 2014.
Russia’s economy depends on energy revenues, with oil and gas accounting for 70% of export incomes.
The country loses about $2bn in revenues for every dollar fall in the oil price, and western sanctions over the annexation of Crimea have made matters even worse.
"The situation is difficult. Western sanctions have made Russia realise how sensitive it can be. But it’s necessary to understand that overall the Russian economy has managed to adapt to external shocks quite quickly and there was no tragedy in it," Anna Nesterova, chairman of Board of Directors of Global Rus Trade, said.
Russia’s national currency, the rouble, has fallen nearly 50 percent against the dollar since August 2014, which has worsened living standards across the country.
A weaker rouble has made imports more expensive, which means the price of everyday goods like tea, children's clothes and books has gone up.
"People are putting off for sure, they are putting off purchasing of expensive items. So car sales which were down over a third last year are still down by about 18% year on year since the first four months of the year. And holidays, another expensive items, they’ve all been on the back burner until conditions improve," Economist Chris Weaver said.
Earlier this year, the Russian government approved a $9.3 billion anti-crisis plan to support a number of industries. The four sectors set to to receive the funds are the car manufacturing sector, transportation machine construction, housing construction and light industry.
The current economic situation is making Russians tighten their belts and face the prospects of poverty. In February, real household incomes decreased by 7% compared with the same month a year earlier, the fastest drop since December 2014. Pensioners already have disproportionately low incomes and account for one-third of the population. The World Bank predicts the poverty rate in Russia will reach 14.2 percent in 2016.
