Page 49 - Russia OUTLOOK 2023

"Inflation [in Russia] was below 12% by the end of the year, 11.9% to be
precise," he said.

Annual inflation in Russia is expected below the targeted level of 4% in Q2
2023, Reshetnikov noted.

"We assume that annual inflation will go down considerably by the end of Q1
as the May peak of prices will go out of the base, and in Q2 we will see figures
most likely even lower than the 4% target, at least for some time," he said.

Earlier reports said that the Economic Development Ministry predicted inflation
of 12% in 2022, and of 5.5% in 2023.

The lower growth rates of consumer prices, seasonally adjusted, conceal
the effect of several diverging factors at the end of 2022. On the one hand,
prices for many goods and services including a certain foreign currency
component were still on a downward trajectory in the fourth quarter of 2022.
The high yield of many crops and the growth in production in livestock are both
having a disinflationary impact.

On the other hand, prices in foreign currency terms for many imported
consumer products, especially of European origin, are up significantly.

This comes as a result of sanctions, as well as of higher costs and more
complex logistics, triggering a reduction in imports.

Persistently high growth of prices in commercial services is in evidence, where
prices in spring were unperturbed by the temporary sharp weakening of the
ruble.

As one-off disinflationary factors fade out, combined with the intensification of
pro-inflation factors related to the labour market, a changing structure of the
economy, and growing consumer confidence, fluctuations in inflation will
emerge. The monetary policy stance aims to return inflation to 4% in 2024, the
CBR said in December.

Russia’s consumer price inflation continued to accelerate in November
to come in close to 0.4% m/m and 12% y/y.

As followed by bne IntelliNews, at the latest policy meeting the Central Bank of
Russia (CBR) argued that the most recent escalation of Russia’s military
invasion of Ukraine and the mobilisation will rather have a disinflationary effect
through subdued demand. This was confirmed in October data as weekly
inflation numbers remained stable.

The acceleration in weekly price growth in November was mainly driven by the
core basket of goods and services posting its strongest advance since July. “It
is still too early to tell whether this was a change in trend or a one-off event
(perhaps driven by the end of the discounts offered during the Black Friday
sales week),” Sberbank CIB commented.

49 Russia OUTLOOK 2022 www.intellinews.com