TV vs. Refrigerator: Officials claim inflation in Russia is under control, but staple food prices tell a different story

Despite official claims that inflation in Russia is under control, prices for many everyday essentials have doubled — an especially heavy blow for the country’s poorest. While headline inflation continues to hover at around 10% year-on-year, the latest statistics obscure the steeper rise in the cost of critical goods and services. This hidden inflation is being felt most acutely by low-income households. It is a direct consequence of the war, which has dragged the civilian economy into recession. Unless the war ends and sanctions are lifted — both of which are unlikely scenarios — poverty will keep rising. Even in the best case, Russia’s road back to economic health will not be smooth: shifting the country off its war footing could trigger a temporary spike in unemployment — and another round of inflation.

• 1.Statistics don’t lie, but they provide incomplete information
• 2.The inflation of the poor and the rich
• 3.Prices and war

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Meanwhile, federal media are projecting optimism. According to state-controlled broadcasts, peace on Russia’s terms is supposedly just around the corner, inflation is coming down, and foreign companies that once fled are now eager to return. The only thing left, they say, is to design a selection process for the worthy and a formal path to corporate repentance. But the numbers tell a different story: GDP growth is slowing, wages have stalled, and public sentiment, according to a Central Bank-commissioned survey, remains mostly pessimistic.

Although the pace of price hikes has slowed in recent months, and despite Central Bank chief Elvira Nabiullina’s insistence that peak inflation was passed in late 2024, expectations among the public continue to be pessimistic. A Central Bank study published in April concluded that this is a psychological response — that people simply do not believe the official figures.

Statistics don’t lie, but they provide incomplete information

The accuracy of Rosstat’s data is a frequent subject of debate even among serious economists. Most agree that the agency does not outright falsify its numbers and, in any case, there is no other institution in the country capable of collecting such a broad array of figures. But experts also acknowledge that the scope of Rosstat’s statistics is precisely where the problem lies.

Rosstat gathers data from across Russia, but it only receives information from relatively large companies. Smaller firms often lack the capacity to complete the agency’s extensive questionnaires, and they face no real penalties for failing to do so. As a result, data from market vendors, small shops, and other micro-businesses often don’t make it into the official inflation statistics.

Rosstat’s numbers exclude data from small businesses, which skews the inflation picture

While people in Moscow and other major cities shop at supermarkets and order household goods from online retailers, much of the country still relies on local markets and small, privately owned stores — and in some places, even on mobile shops that show up once a week. These smaller sellers often buy from the same wholesalers as large retail chains do, but they cannot negotiate the same discounts due to their limited volume, leading them to charge higher prices. On top of that, small businesses face steeper costs for transportation, rent, and wages. The result is that a significant portion of the population shops at non-chain stores where prices are consistently higher, but Rosstat does not register this fact. Ordinary people do, though — and they feel the effects in their wallets.

It is a similar story with wages. Rosstat’s data comes from large employers, and gaps start to appear when it comes to medium-sized and small businesses. Then there are the thousands of people who, for example, fix cars in their garages — some of them registered as self-employed, and many not registered at all. As far as Rosstat is concerned, they don’t exist. By the end of 2024, the share of informally employed Russians had surpassed 20% of the workforce.

Rosstat’s second major problem is its reliance on averages. The agency does try to address this by breaking down key metrics into subcategories — such as wages by industry, or salaries of officers versus enlisted personnel in the military. The same approach applies to inflation. Rosstat calculates separate inflation rates for different product categories, for industrial goods, wholesale trade, consumer goods, and food. But what usually makes headlines is the aggregate inflation figure. Even by official numbers, April’s dip in consumer inflation was largely due to a 1% drop in the price of non-food goods.

Food prices, meanwhile, rose 8%, with some categories — like vegetables and alcohol — climbing even higher (the latter pushed up by an increase in excise taxes). Prices also rose for unregulated services like haircuts and auto repair. Since non-food goods tend to be more expensive than food and services, the 1% drop in that category had an outsized effect on the overall inflation rate.

Still, it is a fact that inflation in the industrial sector is easing. The primary factor here is the prevalence of government contracts, which now account for the lion’s share of demand in heavy industry, especially when it comes to defense. At the same time, global prices for key Russian manufactured exports are falling. Overall, when the prices for many goods are locked in by government contracts at the same time export prices are trending down, it is not surprising that measured inflation is low. Meanwhile, in the extractive sector, Gazprom managed to push through a hike in domestic gas prices above the inflation rate.

There’s simply nowhere for industrial prices to grow – prices for some products are locked in under government contracts, while export prices are falling

As a result, Rosstat continues to report that inflation is steadily declining, while an ungrateful public, staring into their emptying wallets, retains a far bleaker outlook. The same disconnect applies to supposedly rising incomes — and even to the acute labor shortage — which The Insider has previously reported on.

The inflation of the poor and the rich

Another issue is the fact that inflation hits the poor and the rich differently. Strictly speaking, it affects the ultra-wealthy, the wealthy, the middle class, the poor, and the destitute in different ways — but for simplicity’s sake, two categories will do. These can be divided by the share of household spending that goes toward food: the larger the share, the poorer the family. According to UN standards, high-income households spend no more than 20–30% of their income on food, while poor households spend more than 40%. Spending more than 60% is considered a marker of destitution.

According to ROMIR data, in April 2025 Russians spent 34.6% of their income on food — 1.5% more than in March, and 6% more than in April 2024. ROMIR also tracks another indicator: the share of disposable income remaining after a household has paid for food, everyday goods, housing and utilities, transportation, and other essentials. These are the funds a family can spend for a vacation, entertainment, education, home repairs, or can put into savings for a big purchase like a car, a dacha, or an apartment.

On the whole, Russians could be described as living in «dignified poverty»: with careful budgeting, a family might manage to afford a modest holiday, a new laptop for a child, or a car loan payment. But it’s still just the “average temperature across the hospital.” In the aforementioned Central Bank survey, more than 60% of respondents say — year after year — that they have no financial cushion at all. Despite the Central Bank’s tight lending policy, household debt remains high.

InFOM survey commissioned by the Bank of Russia, May 2025

Russia has one of the highest inequality levels in the world,as measured by the Gini index, and inequality is even more pronounced in the wealthier parts of the country. In reality, even in prosperous Moscow, high-end boutiques and luxury restaurants serve only a tiny fraction of the population, while the majority is forced to cut back even on food. Since survey researchers strive to maintain a representative sample across income brackets, the voices of the wealthy — who insist living standards are improving — are drowned out by the much larger share of people barely making ends meet.

Outlays for food, utility payments, and transportation are expenses that are nearly impossible to forgo. There is limited room for saving here, and in the case of housing services or public transport, consumers can’t even switch providers. Economists refer to this as inelastic demand — when prices rise or quality falls, people still can’t stop buying. As a result, products with inelastic demand tend to become more expensive faster and fall in price more slowly, as sellers have little incentive to compete for customers.

This is especially evident in utility rates, but the same principle applies to food inflation. The cost of basic goods has consistently outpaced overall inflation. The price for potatoes — an essential staple for the poor — have risen by 160%, and onions and cabbage aren’t far behind. Also outpacing inflation are fish, vegetable oil, dairy products, and bread.

Basic food products are steadily becoming more expensive: potatoes, onions, cabbage, fish, vegetable oil, dairy products, and bread

Thus, the majority of the population bears the full weight of the “inflation of the poor,” which even the pro-government Center for Macroeconomic Analysis and Short-Term Forecasting (TsMAKP) estimates at 17%. It is no surprise, then, that citizens’ inflation expectations exceed the forecasts offered in official figures. Given the reality, these expectations could even be called optimistic.

Prices and war

There is one root cause of all these troubles: the war in Ukraine. When the state spends a third of its budget revenues on military expenses, and when businesses are incentivized to pursue military contracts or to engage in sanctions evasion in support of the military-industrial complex, the the quantity and quality of consumer goods suffers.

An interesting analysis of investment activity from Russia’s Center for Macroeconomic Analysis shows that businesses behave just like poor citizens: they do not invest or put money into the future, as everything goes toward survival. Sanctions affecting trade and financial restrictions limiting cross-border transactions take a major toll on civilian sector imports, and with so many producers increasing their involvement in the military sector, substitutes for missing foreign goods never have the chance to get made.

At the same time, when the state — already running a budget deficit — responds by increasing the money supply, inflation becomes an entirely natural consequence. The resulting situation can only be managed by setting extremely high interest rates and enacting strict credit market restrictions. In effect, the Central Bank forces the civilian sector to consume less, but it cannot do anything about the growing expenses of the state.

Business behaves just like poor people: it doesn’t invest or put money into the future. Everything goes toward survival

Poor people can no longer borrow — or if they do, it’s through microloans with sky-high interest rates that further limit their purchasing power. Meanwhile, the wealthy stash their money in deposits with ultra-high interest rates, but this is a rare luxury — the top 4% of depositors own 74% of the total funds deposited. Still, neither group appears willing to live this way forever — people are willing to endure for now, but once conditions change, so will consumer behavior.

That’s why any talk about a possible end of the war stirs not only hope, but also concern among economists, who worry that the existing “money overhang” could flood the market, sparking hyperinflation. This fuels rumors about the possibility of the government freezing deposits, or of the potential for the implementation of mass privatization schemes aimed at funneling savings into the stock market.

Still, there are optimistic forecasts. If the fighting stops, Russia’s military budget will shrink, and even if it does not return to prewar levels, a 20–30% cut would be enough to make an impact on the broader economy. If this is coupled with lifting some key sanctions — like the bans on dollar and euro transactions — or if China eases its tight grip on cross-border operations, then imports could quickly surge into the Russian market, pushing prices down. Capital outflows would become possible too, easing the pressure on the money supply. The ruble would likely weaken, but under such circumstances the Central Bank would have far more room to lower interest rates.

That said, returning the economy to a peacetime footing won’t be easy. Military factories will still be needed to replace lost weapons, but they won’t necessarily continue to run around the clock — meaning at least a third of their workforce will be out of a job. In addition, mobilized soldiers will be sent home, with hundreds of thousands entering the job market.

The “structural restructuring” announced at the start of the full-scale war caused major economic shocks that only began to ease after more than a year. The reverse process will likely take just as long. The biggest casualties won’t be the peace-loving “creative class” or powerless pensioners, but men returning from the front with psychological trauma and recent experience wielding deadly weapons. They’ll have to find a new place in life, but with far lower incomes than they received while on the front in Ukraine.

The primary victims will be able-bodied men returning from the frontlines — skilled with weapons and capable of acquiring them in civilian life

The authorities clearly recognize this threat, which is why they continually offer various incentives to «special military operation participants» — if not leadership roles in local government, then free university admissions for them and their children, hiring preferences, and other benefits. However, these programs have so far been poorly executed, and observers are already noting friction between «veterans» and their families on one side, and the rest of the population on the other. In trying to appease people with combat experience, the authorities risk alienating the wider public. Given that both groups will compete over jobs and income, the situation could deteriorate into serious social unrest.