The October devaluation of the ruble brought a fresh acceleration of inflation to the Russian economy. Russia fell into a tax trap: taxes from the population and business will increase by 500 billion rubles
According to the results of the past month, the consumer tariffs index added 4% in annual terms, showing a record increase in more than a year, the statistics of Rosstat said.
For 8 months of the coronavirus decline, overall inflation accelerated 1.6 times, and food inflation almost tripled. In February, Rosstat considered an increase in tariffs for food by 1.77% yoy, and in October – already at 4.83%.
With a cumulative result for 10 months of 2020, inflation in the food sector gained 3.84%, in fact, which became a record value for a comparable period (October to December) since 2016.
“In October, the prices for granulated sugar increased the most between food products. A rise in prices was noticed literally in all constituent entities of the Russian Federation, of which in 32 constituent entities – by 20.2% or more. A greater rise in tariffs was noted in the Kursk and Kaluga regions – by 29.4% and 27.3%, respectively, ”summarizes Rosstat in a release.
On an annualized basis for the country as a whole, sugar prices soared 39.8%. Cereals became more expensive by 22%, vegetables and fruits – by 9%, pasta – by 9.3%, sunflower oil – by 14.5%.
In October, the effect of seasonal inflation used up, and the introduction of compliant quarantine measures led to renewed demand for durable products, says Natalia Orlova, a key economist at Alfa Bank.
Against this background, the rapid rise in high tariffs on food was also reflected, which was not superimposed on the devaluation of the ruble, says Dmitry Dolgin, economist at ING for the Russian Federation and the CIS: thus, in terms of rubles, wheat has grown in price by 40-50% year-on-year.
It is food products that pull the overall inflation upward, but the rise in tariffs in the non-food section is still accelerating, says Stanislav Murashov, an economist at Raiffeisenbank: in October, according to Rosstat, it amounted to 4.15% yoy, and the figure accumulated over 10 months – 3.8% – became a record for 2 years.
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The rise in drug tariffs accelerated to 9.3% and exceeded, among other things, tobacco inflation (8.9%), which the authorities are accelerating by increasing excise taxes.
The tariffs were affected by the disorder in the supply of medicines after the launch of the inherent labeling system, due to which the import of medicines was literally paralyzed. In October, according to the Federal Customs Service, the supply of pharmaceutical substances to the Russian Federation due to the border collapsed by 58%. In addition, import prices have gone upward: detergents have become more expensive by 6%, and household appliances – by 4.75%.
Inflation would grow even faster if it were not for the collapse of consumer demand in the supply sector, a key analyst at Promsvyazbank Denis Popov said: Compared to September, the cost of proposals, among other things, decreased (by 0.1%), and their annual rise was 1.5 times slower than the combined inflation (2.6%).
But the direction of the ruble is showing symptoms of stabilization, the acceleration of the rise in prices will most likely prevent the Central Bank from returning to lowering the interest rate in December, Orlova said: The Central Bank predicts inflation at 4.2% at the end of the year, and so far it fits into this monitoring, at the same time, “the acceleration that we are eyeing at the moment increases the possibility of postponing the likely rate cut at the beginning of the appropriate year”
The “window of opportunity” for the Central Bank has the opportunity to remain closed in 2021, Dolgin believes: inflation is held back by a poor shopper who does not allow retailers to play off the increasing costs on customers.
But in the proper year, people will probably receive assistance from regional budgets – this is evidenced by the authorities’ intentions to remove restrictions on increasing the debt of subjects. The capital, in particular, has subsidized the intentions to place bonds for almost half a trillion rubles, and other regions will follow it.