Is there a credit bubble in Russia?

Over the past year that I have been in Russia, I see people paying with credit cards in stores, and also taking out loans in household appliances stores more and more often. But, okay, I myself have a credit card, which periodically helps me out. But I have already said in my articles that I live alone and I have neither children, nor any really big expenses. But what is about other people? The Russian economy has had virtually no noticeable growth since 2014. People are saved by lending. And I personally know many people who have quite significant debts to the bank. But what is happening now? In a pandemic, the Russian economy did not receive any significant assistance from the state, revenues fell, and the country’s GDP is falling too. And right now, it is bank consumer loans that could save us. But it seems to me that they will not.

Yesterday in his weekly program “Where is the money?” Russian economist Vladimir Milov made an overview of the consumer lending market in Russia. Vladimir Milov says that the credit behavior of the Russian consumer is beginning to change. “The last 3-4 years we have not had economic growth, so the Russians madly took loans to compensate the lack of income growth and maintain the previous level of consumption. However, now people are trying not to increase the credit burden unnecessarily.”

The National Bureau of Credit Reports stated that the number of consumer loans issued in 10 months of this year is 27% less than in 10 months of the previous year. (In crisis!). The growth of retail lending used to be more than 20 percent a year, but now it cannot continue because people have nothing to repay their debts with. This is not very good news due to the lack of economic growth and growth in the well-being of people, in the absence of investment, it was the frantic growth of retail lending that was the factor that supported the entire economic system. But now it started to slow down. This will lead to a decrease in demand and, accordingly, will affect wages, jobs, pensions and the welfare of the country as a whole.

Vladimir Milov also cites Standard and Poor’s, which assessed the situation in consumer lending and concluded that the pace of healthy growth in retail lending in Russia has reached a peak. There will be no further increase in the credit load or will be accompanied by the insolvency of borrowers. Vladimir Milov believes that this is a very important trend reversal, because the factors that kept the economy afloat will soon disappear. The expert says that the forthcoming consequences of the collapse of the consumer lending market are going to be severe.

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