Russia's economy surely is better than it was a year ago. But, tell that to the Russians.

Some 45% of them believe the “worst is yet to come” despite a nice 3.1% recovery in economic growth over the last 12 months ending in May, according to the Russian Public Opinion Research Centre (VTsIOM). Higher food prices and declining savings were the biggest concerns of Russians surveyed. Thanks to the constant drum beat of war and the Russia collusion narrative in the United States, the fears of a military conflict with the Americans over Syria or Ukraine has been rising steadily, VTsIOM pollsters showed.

Moreover, thanks to the constant drum beat of war in the Western press, and the Russia collusion narrative in the United States, fears of a military conflict with the Americans over Syria or Ukraine has been rising steadily, VTsIOM pollsters showed.

Russian fears of war stood at 20% in June versus 12% in January when a friendly president, Donald Trump, was elected to the White House.

The biggest concerns are domestic, VTsIOM's survey shows. The risk of falling incomes topped the list for Russian worrywarts.

“The figures are getting worse. Fears regarding the level of income, unemployment and internal unrest that used to be fairly moderate are also showing unfavorable dynamics," Oleg Chernozub, VTsIOM's leading pollster, said in a note on Wednesday. "Society’s optimism with respect to overcoming the crisis and maintaining political stability is becoming unsteady," Chernozub said.

Russia: From Bad To So-So

After two years of recession caused by falling commodity prices, namely oil, the bear in the woods is back. Just not with a vengeance.

How "back" is he?

In June, Russian industrial production rose 3.5% from the same period a year ago. Mining and manufacturing production rose 5% and 3%, respectively. The mining sector was supported by an increase in natural gas exports to Europe, Russia's most important market.

Despite what the VTsIOM poll suggests, real wage growth rose 2.9% while retail sales growth showed a further gradual recovery of 1.2% versus 0.7% in May. The retail numbers can be misleading because they do not capture online retail sales, a growing part of the Russian retail business.

Industrial production expanded by 2% in the first half of the year.

Unlike in the United States, where debt is always a concern for the government, Russia's external debt is on the wane. It stood at $519 billion last year. But in 2017, if oil prices stay within the $40 to $45 range, Russia's foreign debt load will be around $497 billion, or roughly 36% of GDP. That's basically nothing.

Russia is also building its foreign currency reserves, a staple safety net required of all emerging markets in order to attract foreign investors into its bond and currency markets. Russia's central bank had $378 billion in 2018. A year ago, pro-Ukraine, anti-Russia activists cheered Russia's dwindling reserves, waiting to pop the cork on the champagne as Russia's piggy bank ran down to its last ruble.

As of June, some 59% of survey respondents said their personal life situation was better than it was in 2015-16 versus 38% who said so in June 2016 and 46% in June 2015. The needle is moving in the right direction.

Regarding the situation in the country as a whole, only 34% were positive about it, but that's a heck of a lot better than the adverse response last year and just 18% in 2015.

VTsIOM's social expectations index, which shows how optimistic Russians are about the country’s future, was still negative for 2017 (-39%). The good news is that it was worse in 2015-16.

In many respects, Russia has gone from bad to so-so.

Political risk aside, Russia's government still has work to do domestically in order to help integrate some of the hinterlands with Moscow and St. Petersburg, two of Russia's wealthiest cities.

Those reserves are now around $400 billion and forecast to rise to $438 billion so long as oil stays around $55 next year.

Russia's budget deficit has gone from -3.4% of GDP in 2016 to a forecasted -2.6% based on current oil prices of $45 a barrel. If oil prices rise to $55 next year, then the budget deficit is -0.9% of GDP.

Russia is still running a current account surplus of around $22 billion, based on scenarios compiled by Renaissance Capital on Thursday.

RenCap is forecasting 1.7% to 2% GDP growth this year and next year compared to market forecasts of around 1.3% this year and 1.5% in 2018.

Russia's stock market has been a laggard following last year's boom. Political risk and concerns over a new sanctions bill in the senate is clearly cause for concern. Oil prices have also been a problem, as oil's direction tends to dictate appetite for Russian securities.

Comprehensive, multi-question surveys tend to capture the complexity of a nation's feelings about itself, and the often contradictory sentiments of its citizenry. The VTsIOM poll clearly shows pessimism on the rise, on one hand. But on the other, Russians said their personal lives and the situation in the country are better this year than the last two years.

As of June, some 59% of survey respondents said their personal life situation was better than it was in 2015-16 versus 38% who said so in June 2016 and 46% in June 2015. The needle is moving in the right direction.

Regarding the situation in the country as a whole, only 34% were positive about it, but that's a heck of a lot better than the adverse response last year and just 18% in 2015.

VTsIOM's social expectations index, which shows how optimistic Russians are about the country’s future, was still negative for 2017 (-39%). The good news is that it was worse in 2015-16.

In many respects, Russia has gone from bad to so-so.

Political risk aside, Russia's government still has work to do domestically in order to help integrate some of the hinterlands with Moscow and St. Petersburg, two of Russia's wealthiest cities.