It’s time for Russians to prepare for a new round of inflation
Since the beginning of 2022, the dollar has appreciated by 5.7% against the ruble. This is the worst result among 24 emerging market currencies. Neither high prices for hydrocarbons, nor a budget surplus, nor a trade and balance of payments, nor a low public debt and large international reserves help. Geopolitics outweighed any other factors for the ruble that would have guaranteed it a steady strengthening six months ago. What products and goods will rise in price due to the weakening of the national currency, when this will happen and whether it is possible to avoid price increases, experts told MK.
It is clear that almost all imports, both food and commodity, were under the threat of a new round of price increases. Up to 75% of goods in all non-food retail are of imported origin. This is stated in a study by the Higher School of Economics (HSE), published at the end of 2021. In certain segments of the non-food market, the share of imports reaches 90%. The highest dependence on foreign supplies is in the segment of auto parts – 95%. The share of imported children’s games and toys reaches 92%, footwear – 87%. In addition, almost any domestic production today, to one degree or another, depends on the supply of components, equipment or raw materials from abroad, the study says.
Rosstat estimates the share of imports among food and agricultural products. Import substitution and food security programs are working, but their results are mixed. For example, the import of meat to Russia has decreased: in 2015, the share of imported beef in the Russian market was 50%, in 2021 – 28%. But the share of imported cheeses, despite the food embargo, has grown from 23% in 2015 to 34% in 2021.
In agriculture itself, Russia still buys foreign equipment, components, and grain. For example, for corn we have a 90% imported fund for planting, that is, in order to plant it, you must first purchase seeds in the West. The same situation is with the purchase of hatching eggs for growing chickens for meat (dependence on imports – 80%), veterinary drugs, pesticides. And this means that the appreciation of the currency for which components, fertilizers or completely imported goods are bought will also be reflected in the price tags in stores.
It should be noted that the record high inflation in 2021 over the past five years – 8.4% – was achieved with a relatively stable ruble: its exchange rate almost did not storm last year. Now the ruble has begun to actively fall under the influence of negative geopolitical factors, and this means that the Russians should prepare for a new wave of inflation.
“Until the end of the quarter, various groups of goods will rise in price by 10-15%,” predicts Andrey Vernikov, Head of Investment Analysis and Training Department, IC Univer Capital. First of all, prices for fruits, tea, coffee will rise, followed by confectionery products due to flavorings and those products that use imported packaging. Russia is a major importer of food, and it will not be possible to get rid of the world’s rising prices for it. The growth of the dollar adds drama, because, for example, even the cost of vegetables that we consider domestic depends on the dollar. First, the price of fertilizers is formed on the world market. Secondly, our farmers are heavily dependent on imported seeds. For example, the share of domestic potato seed material is only 15%, the rest is imported, recalls Vernikov.
The question arises: will the authorities be able to take any action to stabilize the ruble and prevent a new massive rise in prices in the consumer market?
“The monetary authorities have several tools to reduce the impact of the weakening national currency factor on prices,” recalls Dmitry Babin, stock market expert, BCS World of Investments. — First of all, this is an increase in the key rate, which restrains excessive consumer demand, and also supports the ruble. In addition, the Central Bank recently suspended the purchase of foreign currency, carried out under the budget rule, in order to prevent the depreciation of the ruble due to the worsening geopolitical situation.”
Let us note that so far all these instruments have not worked very effectively, to put it mildly: the ruble has fallen and inflation has accelerated. Until geopolitical tensions subside. There is no need to count on a more favorable scenario: Russian consumers should prepare for a new round of prices on the shelves.
Newspaper headline:
Geopolitical Wave of Inflation