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All news / Bad weather in Russia: 5 economic implications

  • 26 Jul 2017, 09:36

This summer’s bad weather is not only putting a downer on the life in the capital, it’s also severely affecting the domestic economy. Farmers have been hit hardest while inflation and unemployment is on the rise. However, fashion retailers are offering big discounts in a bid to sell summer clothes - so there is one upside.

This summer in the western part of Russia has been unusually cold and rainy. From May, Moscow witnessed rain, thunderstorms, and even snow. The Russian Hydrometeorological Center called May the “coldest” and June the “second coldest” the country has witnessed in the 21st century. The average temperature in June was two degree Celsius lower than normal, reaching only 14.5 degrees compared to the usual 16.5.  

It’s no surprise that such abnormally cool summer weather has impacted the country’s economy and consumer trends of the Russian public. Here are five consequences of the dark skies.

1. Agricultural producers suffer

Agriculture is dependent on the weather so rain and cold temperatures will most likely damage domestic producers’ income. As the Central Bank of Russia reports, bad weather reschedule the timing of planting of some vegetables (potatoes, cucumbers, tomatoes, carrots, onions, etc.) by three to four weeks, so they will be harvested later. Only 82 percent of the total number of potatoes due to be planted this year are in the ground, while only 77 percent of vegetables have been planted.

The National Union of Agricultural Insurers forecasts that potential losses might reach up to 2.6 billion rubles ($43.8 million).

“The majority of agricultural companies are not insured, so the main part of these losses will become a burden of the companies themselves and this might lead to further growth of the food basket in Russia and increase in the import of food products,” Pavel Sigal, first vice president of Opora Rossii, a Russian public organization of small and medium enterprises, told RBTH. In this situation, the government might provide subsidies to limit inflation growth, the expert says.

2. Inflation climbs up

Agricultural losses forced food prices up, which in turn lead to inflation. The Central Bank of Russia revealed that by the end of June inflation accelerated and reached 4.4 percent, following the unexpected 8.3 percent rise in food products.

In this situation the Central Bank will have to adjust the levels of key interest rates and take into account other potential risks, experts from the Russian Presidential Academy of National Economy and Public Administration (RANEPA), Gaidar Institute, and the Russian Foreign Trade Academy believe. Potential recovery of consumer demand and the weakening of the ruble exchange rate might facilitate a further rise in inflation, they note.

3. Shift in buying patterns

The cold summer prompted many to change their usual buying pattern. The public started purchasing umbrellas and heaters instead of ice cream and cold drinks, like kvas.

On the one hand, retailers noted a 135 percent increase in umbrella sales, rubber boots (50 percent), and playstations (21 percent). On the other, they experienced a drop in sales of ice cream (twofold), meat for shashlyk (20 percent), air conditioners (30 percent) and clothing (15 to 20 percent). Some fashion brands have even offered discounts of up to 70 percent in a bid to sell summer clothes.

4. Rise in unemployment

According to the Ministry of Economic Development, the bad weather in Russia also impacted the unemployment rate, largely in sectors sensitive to weather conditions. Agriculture suffered the largest fall in employment numbers (a 15.4 percent decrease compared to May last year), while the trade, hotel, and restaurant business were hit by a 3.1 percent decrease. Education experienced a 1.4 percent decrease.  Overall the number of unemployed people in Russia rose from 3.9 million in April to 4.1 million in May.

5. Less interest towards domestic resorts

The tourism industry in Sochi and Crimea are witnessing losses due to the weather too. In June the public preferred warmer destinations like Cyprus, compared to Black Sea region.

According to the Level.Travel online service, currently Russian resorts are less popular than the likes of Turkey (37 percent) and Greece (14 percent) this year.

Interest in Russian resorts has dropped by 10 to 15 percent from last year and many hotels and tourist agencies are trying to make up for it by slashing prices. Experts believe the situation will pick up soon though, when the weather heats up. It’s already around 30 degrees in Sochi.