TheEconomistMarch26th 2022
Graphic detail Inflation in Russia89Startingtobite
I
n december Vladimir Putin, Russia’s
president, said that inflation was “the
main problem” for Russia’s economy and
citizens. Today, the country’s greatest woe
is its invasion of Ukraine, in which thou
sands of soldiers have already died. But in
flation has not gone away. On the contrary,
the war has sped it up to levels not seen
since Russia’s financial crisis of 1998.
On March 23rd the government an
nounced that consumer prices rose by 1.9%
in the seven days to March 18th, following
increases of 2.1% and 2.2% during the pre
vious two weeks. In total, that brought in
flation during the first 21 days of the war to
6.4%, compared with 0.8% in the 21 days
preceding it. At the wartime rate, consum
er prices would triple every year. Moreover,
the inflation index assigns hefty weights to
the prices of heating and petrol, whichhavebeenflatforweeks.Hadtheyrisenin
line with the cost of fuel in global markets,
inflation would have been even higher.
Surging demand and tightening supply
have both played a role. As war broke out,
fearful Russians stocked up on staple foods
like sugar, flour and buckwheat. NielsenIQ,
a research firm, estimates that between
February 21st and March 6th retail sales of
sugar, cereals and other nonperishable
goods rose by 46% compared with a year
earlier. Such panic buying, driven by viral
photos of shoppers fighting over groceries,
has led to shortages of what the govern
ment deems “socially important goods”.
So long as Western sanctions remain in
place, an even bigger driver of inflation is
likely to be the difficulty of acquiring
goods that Russia does not produce at
home. In addition, whatever the country
does import in spite of sanctions has be
come more expensive, because the rouble
has lost nearly a third of its value against
the dollar. Since the war began, official sta
tistics show that the prices of smartphones
have jumped by 18%, those of foreign cars
by 27% and those of televisions by 33%.
Given the government’s deluge of false
propaganda about its war, scepticismmight be warrantedaboutits economic
statistics. However, independent esti
mates by PriceStats, an American firm that
tracks prices of items sold online, actually
show slightly less inflation, suggesting
that Russia is not tampering with the data.
The government has tried to stabilise
the rouble by requiring exporters to sell
80% of their foreign currency within three
days of obtaining it. The Central Bank of
Russia (cbr) has also begun buying the
country’s sovereign debt, and raised its
benchmark interest rate to 20%. Yet in its
statement listing the causes of this “tem
porary but inevitable period of increased
inflation”, the bank omitted the shortages
of imported goods caused by Western
sanctions. Getting those sanctions lifted
would almost certainly require ending the
war—a decision that rests with Mr Putin,
not monetary policymakers.
The cbrsurveyed economic analysts in
early March. On average, they predicted
that in 2022 Russia’s gdpwould shrink by
8% and inflation would come to 20%. With
total price increases already at 8% this
year, meeting this forecastwould require
inflation for the rest of 2022tofall to one
seventh of its current level.nRussian consumers are already feeling
the cost of war02010305070406080020402000Russiainvades
UkraineRoubledevaluationcaused
byoil-pricecrashRussianfinancial
crisis1997 05 10 15 20 22*→ The war in Ukraine has already raised the prices paid by Russian consumersChange in Russian consumer prices
since invasion of Ukraine, %
February 25th to March 18th 222,
selected productsMonthly change in Russian consumer prices, %OnlinepricesinRussia,February24th2022=00*March 222 projected
Sources:Rosstat;StateStreetGlobalMarkets,PriceStats; The EconomistCumulativeshareofconsumerspending,%5 1 10 5220 5330 540Transport
includingfuelRecreationincluding
electronicsHealthFurnitureand
householdappliancesFoodAllitems110105100
February MarchRussiainvades
UkrainePetrol Heating Cigarettes VodkaWheat
flourToilet
paperSugarSmartphonesForeign-made carsVacuum cleanersTelevisionsHoliday to Turkey