Loading ...Russia Takes Double Punch as Vanishing Workers Fan Prices
The aging workforce is packing a double punch for the Russian economy.
The unborn generation of the 1990s, a period of hyperinflation and instability after the Soviet breakup, left the nation depleted of younger workers. Unemployment is at a record low, putting pressure on wages (RUMEREAL) and helping keep inflation near the fastest since 2011. The poor demographics are shaving 0.5 percentage point off economic growth a year, according to the Higher School of Economics in Moscow, which estimates the working-age population will shrink by as many as 15 million people, or more than the size of the Russian capital, by 2030.
Aging populations are unsettling central bankers from Tokyo to Frankfurt in their struggle to prevent deflation as older workers tend to defer consumption in favor of savings. Russia faces the opposite threat: entrenched inflation that risks shackling monetary policy already lurching from one crisis to another since Crimea was annexed in March.
“Taking into account low unemployment and tight supply on the labor market, wages will remain at a high level, affecting inflation,” said Natalia Orlova, chief economist at Alfa Bank in Moscow. With the central bank increasingly drawing attention to poor demographics, it’s “in effect saying it can do nothing for the economy, whose problems are structural in character.”