MOSCOW - With Russia now firmly wedded to the consumer society, analysts say a spending boom is set to drive the Russian economy just like the oil sector has done.
Average income rose by 14.6 per cent in the first half of this year compared with the same period last year.
Official salary levels in Russia are still very low, averaging US$160 (S$280) a month, but they have taken off sharply since 2000.
Moreover, the proportion of disposable income after taxes or fixed outlays such as rents and credit repayments is proportionally much higher for Russians than it is in most other developed nations.
Low income tax - 13 per cent on average - means that some 87 per cent of income in Russia remains disposable, compared with 65 per cent elsewhere, because a high proportion of the population pays no rent and has little or no personal debt.
A study by the brokerage firm Renaissance Capital estimates that disposable income in the country is expected to increase by 46 per cent by 2010.
The authors of the report note that 'Russians who are not affluent prefer spending to saving', with a high proportion of Russian income consequently being devoted to consumer spending.
Muscovites have come a long way since the day in February 1990 when the first McDonald's fast-food store opened in the then-Soviet capital.
Consumer patterns - especially among the young - are rapidly starting to resemble those of other European cities.
An economist with IRG market analysts said: 'Russians are currently making up for the years of socialism when the shops were empty, and there's a real consumer frenzy going on, especially among youngsters.'
The financial crisis of August 1998, when many Russians saw their savings wiped out in a generalised collapse of the banking system, left lingering memories, with the result that as many as six in 10 Russians still prefer to do without a bank account.
For certain purchases such as cars, clothes and shoes, Russians are happy to spend big and buy foreign brands rather than cheaper local products, the Renaissance Capital report said.
When it comes to clothes, in particular, they are 'impulsive buyers - they buy at the start of the season and aren't interested in sales', commented Renaissance Capital analyst Natasha Zavogzdina.
'Image is an important feature in the mind of Russian consumer,' she noted.
However, given their modest purchasing power, 'they are quality-oriented'.
With regard to food, Russians prefer home-grown products 'which they see as purer, in contrast to imported products that contain more additives', the analyst said.
Retail sales, which totalled US$110 billion last year, are expected to almost double by 2008, reaching US$204 billion, Renaissance Capital predicted.
The sectors set to benefit most from the consumer boom are services and household durables: telecommunications, transport and restaurants on the one hand, and homes, furniture, fittings and equipment on the other.
The trend is strikingly visible in the mobile phone sector, where sales of phones have soared by an astonishing 50 per cent in the first six months of the year.
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