Page 44 - RusRPTApr21

Oxford Economics now see year-end 2021 inflation at 5.1%, still 1.1% above target, and 2022 inflation converging back to the 4% target only in H2, with risks skewed to the upside. The CBR says inflation will return to 4% only in 2022.
This means that to reach the neutral policy stance the CBR will need to increase the policy rate to at least 5.50% (the middle of its estimated neutral policy range of 5-6%). In terms of the medium-term inflation outlook, the domestic factors – ageing population, weak real incomes growth – still argue for inflation to stay anchored at target.
New data from Rosstat show that food prices continue to rise in Russia, despite the government’s efforts. Last month, consumer prices rose 5.67% compared to February 2020. Fuelling the growth was a rise in food prices, which increased 7.72% in annual terms.
The rise in food prices has been ongoing since the second quarter of 2020, and it’s a global phenomenon. As demand surged in China, supply chains were affected by the pandemic, and adverse weather hampered harvests, global food prices rose to a six-year high. But this rise in food costs affects nations unequally. In Russia, food prices rose by 6.7% in 2020. Fruit and vegetable inflation, in particular, amounted to 17.4%.
Russians generally feel these changes more than consumers in wealthier countries because lower incomes mean that a greater portion of household budgets go towards groceries. According to an economist cited by The Bell, food amounts for approximately 40% of Russian household costs. To make matters worse, Russian real disposable incomes declined 3.5% last year. In the EU, by contrast, disposable incomes rose 1.5%.
The authorities have been actively trying to tamp down on food price growth since December, when they concluded agreements with sunflower oil and sugar producers to limit price growth through March. In January, news emerged that the government might similarly move to limit prices for pasta, eggs, and grains. One month later, the government established export quotas for wheat, rye, barley, and corn. Then last week, poultry and egg producers unexpectedly announced that they would freeze prices for two months—a decision they say that was made “absolutely voluntarily.”
As the Rosstat data show, these measures have not had their intended effect, and the topic has become a hot spot among Russia’s government. As evidence, look no further than a new draft law proposed in the Duma on Monday, which seeks to criminalize false information about the prices changes of socially-important food products. According to the bill, fake news about inflation would be punishable by a RUB200,000-RUB800,000 ($2,700- $10,700) fine or up to three years in prison. The goal of the legislation is to prevent people from deliberately creating panic in food markets, thus leading consumers to stock up on basics like meat, eggs, sugar, and butter and
44 RUSSIA Country Report April 2021 www.intellinews.com