Page 54 - bne magazine September 2021_20210901

54 I Eastern Europe bne September 2021
The ingredients to make a portion of borscht currently cost RUB317, but falling incomes mean families can cook less borscht each month than at any time in the last five years.
The borscht index: The number of portions Russians can afford to cook has been falling
This year’s inflation has disproportion- ately hit the lower income bracket of society as foods make up a much larger share of their shopping basket. In the boom years of the noughties food’s share fell to around 35% of a total household’s spend, but currently it has crept up to over 50% again, reminiscent of the dark days of the 1990s. That has also affected the population’s perception of where prices are headed, which is itself an inflationary pressure.
At the last monetary policy meeting CBR governor Elvira Nabiullina warned that inflation expectations have become unanchored with the population expecting price rises far in excess of
the actual price rises of around 14%, although the governor suggested that inflation may have peaked now that prices have already begun to decline. The rise in prices for food in May-June was a "seasonal issue", according to Nabiullina.
Meat today?
The average cost of products needed to prepare borscht had risen to RUB314 ($4.23) by July 2021, which is 13% higher than at the beginning of the year, but real incomes in Russia grew much more slowly. With a nominal average monthly income of RUB56,171 ($756.27) each family of four could afford to prepare 179 servings of borscht a month, the lowest number
in the last five years, according to the calculations by Vedomosti.
Cameron Jones in London
The purchasing power of Russians in the first half of this year fell
in 64 of Russia’s 85 regions, according to the “borscht index”, a sort of Russian version of the well-known “Big Mac index”.
The benchmark ingredients in the soup – the so-called “borscht set” –were set by a retired teacher Natalya Atuchina from Omsk, who invented the index in 2014 to track rising prices after the sanctions regime was first imposed on Russia.
Russians who lived through the hyperin- flation of the early 1990s remain some- what traumatised by the experience and inflation to this day remains one of the public’s biggest concerns. So pension- ers spending their spare time inventing inflation tracking indicators is not so strange in Russia as it may sound.
Inflation has soared this year, and the rising cost of food has been one of the
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main drivers. Inflation has been rising all year and topped 6.5% in July,
well above the Central Bank of Russia (CBR) target rate of 4%, forcing the CBR to hike rates several times this year: March (25bp), April (50bp),
“For families living on the border of poverty Vedomosti reports they have an income of RUB13,100 left over after taxes, utilities and housing costs, or a mere 48 portions of borscht”
June (50bp) and July (100bp) to the current 6.5%.
However, according to Rosstat figures the cost of the borscht set rose even faster and jumped by between 11.3% and 35.3% in May, depending where you are in Russia.
"There is already a decline in prices for the products included in this borscht set,” Nabiullina said at a press confer- ence on July 24.
With a general election looming, Russia’s ruling party United Russia created a working group to combat the