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Inflation in Russia is an Endless and Tiring Process
April 21, 2011 15:18

Prices in Russia are rising faster than in any other country with emerging markets. At the moment inflation is the most big problem in the country.

French magazine La Croix is also concerned about this issue. If you come to any supermarket in Moscow, you will see high prices everywhere. Bread, potatoes, sugar — any "everyday" product will make you angry as its price will take away all your money. Of course Russians just have to accept that, but not without a small part of fatalism thinking. "Of course we should fight! But against whom?", — says young woman Tatyana showing her bag to the French correspondent, — "Some time ago it was possible to buy almost everything you need just for 1000 rubles, but now there is no way to do that".

Prices for potatoes and white cabbage, known as "political vegetables" since food shortages in the Soviet era, are likely to continue climbing until new crops arrive on the market in late spring, said Dmitry Rylko, director of the Institute of Agricultural Market Studies.

"We are told that annual inflation rate does not exceed 10%, but we clearly see that everything has grown by more that 15%", — says Alexei, school teacher, in a conversation with La Croix correspondent. — "We have a small salary and our pensions are even smaller. Of course, there is no hyperinflation of 1990-ies, but it is enough to hit our income". The greatest fear of this man is caused by food prices, as well as bills for electricity, water and other utilities. All that good Soviet era with subsidizing payments and almost free housing has gone. According to some recent polls, almost a half of Russian citizens is ready to take part in protests to defend their rights.

This almost happens because of the social inequality that continues to grow. 10% of most rich Russians now earn 30 times more than the poorest 10%, according to Vedomosti. In addition, American Forbes magazine notes that Moscow has regained the status of the billionaire capital of the world. According to the CNews, Moscow is a home to 79 of Russia’s billionaires, more than any other city in the world. "Russia accounts for a third of Europe’s 300 billionaires, and 15 of the world’s 100 richest people, more than all the other so-called BRIC countries combined (Brazil, Russia, India and China) and more than Saudi Arabia", notes the resource. All this rich people turn up prices and this is not good for the middle class.

There are also several explanations of the current inflation. As for food, there is a problem of last year's drought, which wiped out a third of the harvest. Besides this fact, inflations still continue to go on due to the imports growth associated with the economic rise and fall of the ruble. Thus, the import is growing and prices continue to rise.

According to the Financial Times, Russian food prices rose by 12.9 per cent in 2010, as compared to 6.1 per cent over the same period in 2009, far outstripping consumer inflation of 8.8 per cent for the full year. "So far the most officials have done in response has been to ban grain exports. Policy-makers in other emerging markets who also experiencing extreme food price increases – like India and Brazil – have resorted to similarly drastic measures. But the latest figures from Rosstat reveal Moscow has not done enough; this is sure have officials thinking hard about what to do next", the Financial Times resource says.

In addition, in 2011 year Russia’s inflation is expected to be no higher than 7%, according to Alexei Ulyukaev, first deputy chairman of the central bank. Alexei Ulyukaev said, that Russian policymakers will use all “equipment” to manage inflation including managing its policy interest rate, reserve requirements and using a flexible exchange rate policy.


Tags: Russian economy     

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