Russia survived a year with galloping inflation / Economy / Nezavisimaya Gazeta
National federal trade
For two weeks in January, tomatoes, according to expert data, have risen in price by 17%. Photo by RIA Novosti
2022 Russia lived in the conditions of a galloping installation. In 2023, if it has to do without force majeure, the gallop will be replaced by a creeping price increase in the range from 5–6 to 7–8%, analysts expect. Economy at a crossroads. According to the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF), the decline in Russia’s GDP in 2023 will be more thorough. This means that demand is not improving and prices are jumping nowhere. In retail, however, they hope for sales growth, in particular, food products. Imports are being carried out, and if the ruble weakens, the upper support bar will again shift to 10%.
At the beginning of the year, a jump in prices was recorded. It is mainly associated with “partial, but far from complete” increases in regulated tariffs for transport and housing services, the CMASF said in its “On the dynamics of the situation” review for the first half of January.
Thus, judging by the data presented, in two weeks the cost of travel in the metro rose by about 7%, in the tram – by almost 6%, in the trolleybus – by 4%, in the city bus – by almost 3%. The payment for housing in the state (municipal) housing stock increased by more than 2%. Excisable goods were also getting more expensive – the growth for two weeks amounted to about 1%.
“At the same time, there is a seasonal and intensifying conflict with logistics on a number of import requirements for price hikes for fruits and vegetables (by 9.7% in two weeks), – says Dmitry Belousov, head of the CMASF. – This growth was frontal. It was especially high on greenhouse vegetables: cucumbers rose by 19% in two weeks, tomatoes – by 17%. Prices for onions increased by 11%, for carrots – by 10%.
Prices for medicines, especially those used for the prevention and treatment of acute respiratory viral infections, comfort and covid, have risen rapidly: for a number of items, the growth in two weeks is from 1 to 2%. “Finally, a partial return to the shelves of “expensive” consumer imports was accompanied by a jump in prices for consumer electronics: smartphones added 2.3% in price, TVs – 15%,” follows from the review.
In 2022, inflation in Russia amounted to 11.94%, which is “several times lower than most forecasts made by significant weights.” This year, the Central Bank (CB) expects the consumer norm to fall to 5-7%.
However, as reported on the portal, even 12 percent inflation is “not a small amount at all.” “Inflation up to 10% is considered creeping, with a rather simple struggle with monetary methods, monetary policy instruments. And she doesn’t struggle much with consumer sentiment. Inflation from 10 to 50% per annum is already called galloping, and above 50% – hyperinflation,” Georgy Ostapkovich, Director of the Center for Business Research at the Institute for Statistical Research and Scientific Research, presented on the research portal. In the past few years, as he recalled, inflation in the Russian Federation is about 4%, “and it has been calculated that it is necessary to fight it.”
Analysts polled by NG, however, argued a little with the thesis of a galloping position. Inflation at the level of 12% “formally, according to one of the certain ones, it can be considered galloping, to the fact that geopolitical events arise in phenomena,” Olga Belenkaya, head of the Finam company department. However, according to her clarification, most of the annual price growth – more than 80% – was realized in the first quarter of 2022.
“And since May, seasonally adjusted monthly rates have been adjusted in terms of the year, which turned out to be below the average of 4%, which increased the strengthened ruble in the second quarter of 2022, weak consumer demand, and a record harvest,” Belenkaya listed.
“To talk about Russia as a country with a galloping inflation of misfortunes. In the second half of the year, there were weeks with negative inflation or near-zero price growth,” added Artem Tuzov, Director of the IVA Partners Department.
Now, after last year’s one-time shock, inflation is fading, Igor Safonov, an expert at the HSE Development Center, told NG. “In addition, price changes are very heterogeneous,” he returns. “In some cases, there are both items that have risen in price by 30% per year (for example, detergents and cleaning products, perfumes and cosmetics – as of the end of December), and have fallen in price by 4-6% (eggs, TVs, smartphones).”
Belenkaya, in turn, had a significant impact on the growth in prices for cars, foreign tourism services at the end of the year – an increase in prices by tens of percent. Thus, proceeding precisely from the heterogeneity of price jumps, the expert concluded that last year inflation hit both low-income groups of the population and the conditional middle class.
Assessing the prospects for this year, Belenkaya noted that so far the Central Bank’s forecast of a reduction in supply to 5-7% “seems to be quite justified.” But the level of risk that remains largely unexplained is consumer behavior: “Whether the current high propensity to save persists (in which case inflation may remain high into 2023), or consumption is declining (in which case inflationary pressures may be stronger).”
“So far we are seeing inflation in the range of 6-7%. The main risks are the potential weakening of the ruble and the possible excess of the budget deficit over the planned value,” Belenkaya said. The point inflation forecast of the Center for Development of the National Research University Higher School of Economics for the end of this year is 5.3%.
At the same time, on the instructions of Tuzov, the expectations of establishing in the Russian Federation up to 5-7% by the end of the year are not just justified, but “unfortunately, justified.” “The whole problem has become that the focus is on infection with inflation with infection in 2022, not the Ministry of Finance or the Central Bank, but a recession,” the expert says. Inflation, as needed within reasonable limits, is also an indicator of whether the economy is alive. Speaking figuratively, a high temperature is a sign not only of a disease that needs to be treated, but also of the fact that the patient is still alive.
At the household level, 12 percent inflation means that the population has become poorer by the same 12 percent, acknowledges Tuzov. But at the same time, in his opinion, it does not occur that inflation, for example, at the level of 1% with a decrease in the RF GDP by 2.5% “would mean mass unemployment, which is much lower than stable work and parallel ratios.”
We remind you that a forecast for 2023, which formed the basis of the budget, is being prepared, it assumes an increase in the RF GDP by the end of 2023 by 0.8%. After updating the data for mid-December, the CMASF predicts that the economic downturn in the Russian Federation will be from 2.3 to 2.5% in 2023.
“After taking into account the latest accumulated data, the financial risk early warning system developed by CMASF remains dangerous due to the high probability of the continuation of the economic downturn in 2023.
The ensuing recession may be hampered by protracted, unhealthy cardiovascular physical activity, with a severity that may last more than four consecutive quarters, expressed in patients. True, they specified that “such damage may also be of a technical nature, associated with the effect of the “high” pre-crisis period.” This conclusion can be calculated as the number increases up to half of the first quarter of 2023.
Thus, to clarify, the Russian economy seems to be at a crossroads. On the one hand, there is a risk that the economic downturn will be obvious. And this is necessary to restore consumer demand, which means that inflation can really freeze.
On the other hand, for example, retail representatives are just hoping for a revival in sales in their part of food products, as reported by RIA Novosti with reference to the Association of Retail Companies.
Plus, as Yevgeny Mironyuk, an expert on the financial market at BCS World of Investments, clarified, the forecast for the proposal-2023 is at the level of 6-7% of the geopolitical situation.
Judging by Ostapkovich’s explanation, one must take into account that there is a 10% drop in the ruble against the dollar in terms of detection – these are additional values from about 0.6 to 1 percentage point to the supply indicator. So, in his opinion, if the ruble goes down, then the expected rate of 5-7% can be confidently added to the percentage that will come up due to the fall of the ruble.