Russian Minister of Economic Development and Trade Elvira Nabiullina
Photo: Êèðèëë Òóëèí
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Inflation Starts the Year Strong
The Ministry of Economic Development and Trade is predicting that inflation for January will reach 1.8 percent. Although that figure is higher than for January 2007 (by 0.1 percent), economists say that the annual target of 8 percent need not be scuttled yet. A ministry spokesman pointed out that a January spike in inflation is normal, since many fees rise at the new year. January inflation in 2006 was 2.4 percent. This year, the price of housing services is expected to rise 20 percent, electricity will rise 14 percent and natural gas will rise 25 percent. Investment banks are predicting 10-11 percent inflation this year, noting that the Central bank has no effective means of holding prices down.
Inflation in Russia in 2007 was 11.9 percent. In December, consumer prices rose 1.1 percent, mainly due to food prices, which rose 1.6 percent. Food prices are likely to continue to rise throughout this year. In November of last year, food producers and retail chains agreed to a price freeze until January 31 on “socially significant” products, such as bread, low-fat milk, kefir and sour cream, in forms that are sold in the lowest price range. In spite of that measure, prices for milk and condensed milk rose 3.9-4.1 percent in December.
The influx of foreign capital will also present a significant inflationary risk this year. The influx itself is expected to diminish due to increased uncertainty about the upcoming presidential election. The Economics Ministry is predicting that the influx will fall to $50 billion this year. Bankers have suggested even lower figures.
www.kommersant.com
All the Article in Russian as of Jan. 15, 2008
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