World Bank: Russia Should Consider Minimum Income to Fight Poverty

Russia contained a COVID-induced spike in poverty in 2020 but to fight continuing high levels of economic hardship it should consider introducing a guaranteed minimum income, a World Bank official said, ahead of a looming parliamentary election.

Addressing falling living standards is one of the priorities for President Vladimir Putin before a parliamentary election due in September. He has for years promised to raise real disposable incomes, one of Russia's most socially sensitive issues.

Russia's poverty level was 12.1% at end-2020, down from 12.3% the year before, and is set to fall further to 11.4% by the end of 2021, the World Bank said.

Putin has said this level should fall to 6.5% by 2030.

"Fighting poverty is still a very important call to have given the double-digit poverty in Russia," Apurva Sanghi, the World Bank's lead economist for Russia, said in an interview with Reuters.

To provide extra targeted support to people in need, Russia could consider offering a guaranteed minimum income, Sanghi said, echoing an idea that some Russian lawmakers have recently floated in the light of the upcoming election.

"GMI is a safety net of last resort where the payments are not generous enough to forgo employment but which provides protection from extreme poverty."

Russia's social policies, which includes payments for families with young children, successfully contained a COVID-induced spike in poverty last year, Sanghi said.

Real disposable incomes have fallen steadily since 2013, apart from a couple of years when they showed a negligible increase, in large part due to the weaker rouble and inflation amid sanctions imposed against Moscow over the annexation of Crimea in 2014.

If real disposable incomes grew at 1.5% a year, close to the potential GDP growth rate, it would take up to 2027 for them to recover, Sanghi said.

Still, Russia's oil-dependent economy is on track to grow by 3.2% in 2021 after falling 3% in 2020, its deepest contraction in 11 years, the World Bank said in a report on Wednesday.

The World Bank did not mention the September election in its regular report and in the interview.