Translated material
Anesthesia doesn't work
Experts doubt the effectiveness of price taming
Yesterday, Russian Minister of Agriculture Alexey Gordeev publicly shared optimistic news. According to him, the rate of growth in food prices, which in recent months has seriously frightened both the authorities and the majority of Russians, has finally slowed down. “Food prices have stabilized in recent weeks. They correspond to the rate of inflation growth in the country,” the head of the Ministry of Agriculture emphasized. Although, according to experts and statistics, there are, unfortunately, no real grounds for optimism yet.Apparently, Minister Gordeev is referring to the last two weeks, during which the federal agreement on freezing prices on socially important goods , concluded by a number of the largest food producers and sellers, is in effect. It is on this agreement, as well as on a number of customs and tariff measures, that the government pins its hopes in the fight against food inflation (in recent months, basic food products have risen in price by 40-60%).
Meanwhile, official data from Rosstat cast doubt on Mr. Gordeev’s words. In general, in October, prices for goods, including those included in the frozen list (the agreement is valid from November 24), increased again. Over the month, sunflower oil became more expensive by 26.3%, cheeses and eggs - by 23.9% and 20.9%, respectively. Pasteurized and unpasteurized milk increased in price by 11.2-13.1%, fermented milk products, cottage cheese of various fat contents - by 9.6-10.7%. As for general inflation, its level in the last week of October did not differ much from the previous ones: the first week - 0.5%, the next two - 0.4% each, the last - 0.3% (in general, October inflation was 1.6% versus 0.3% a year ago, and for ten months - 9.3% versus 7.5% for the same period in 2006).
However, if the slowdown in food price growth in the last week of October and the first of November is a fait accompli (Rosstat does not publish weekly data on inflation in the food market), the question arises to what extent this is the result of anti-inflationary measures. Many experts doubt this.
Firstly, “freezing” only applies to six types of goods (two types of bread - wheat and rye, milk with at least 1.5% fat content, kefir 1%, sunflower oil and chicken egg). At the same time, even before the conclusion of the corresponding “anti-inflation pact,” sellers and food market analysts almost unanimously declared that the losses of retail chains would be compensated by increasing prices for “non-social” products. Secondly, export duties on grain, with the help of which the government plans to limit its export, will begin to take effect only on November 12. Thirdly, the grain interventions that take place in Moscow at the National Commodity Exchange, according to analysts, do not affect prices in any way due to insufficient trading volumes, which, in turn, are explained by the extremely inconvenient conditions for the sale of grain from state bins.
As for the situation on the world food market, which, as the authorities assure, has become the main reason for the rise in food prices, then, judging by the situation as a whole in October, there has been no peace on world markets. According to Development Center analyst Oksana Osipova, in October prices rose for all important agricultural goods, with the exception of meat.
Under these conditions, analysts are refraining from overly optimistic assessments of the future situation on the Russian market. “There are still a lot of unresolved issues, and there is no need to talk about stabilization in both the food and non-food markets,” notes Maria Kataranova, an analyst at the Economic Expert Group. Oksana Osipova shares a similar opinion. According to her, meat can go off at any moment, including due to an increase in prices for feed grain. In addition, she believes, “bread may become more expensive again, since over the past month the price of durum wheat has increased by 25% on the world market.”
This year, sharply increased budget expenditures are also having a significant impact on Russian inflation. Yesterday, the State Duma approved changes to this year's budget, suggesting an increase in expenditures by more than 1 trillion rubles. True, as Deputy Prime Minister and Head of the Ministry of Finance Alexei Kudrin reassured, only 47 billion rubles will be spent this year, which will not put additional pressure on inflation. The remaining funds are expected to be spent in 2008.
Experts agree that all this money, including 47 billion rubles, can affect inflation only next year. However, Maria Kataranova believes that even the expenses initially planned by the budget will be enough to accelerate the rate of inflation this year. Having weighed all the pros and cons, the Economic Expert Group predicts inflation at the end of 2007 at the level of 11-11.5%, in 2008 - 9.5-10% (the government hopes for 7.5 %). The Development Center's forecast for this year is higher - 11.7%, and for the next year it is lower - 8.5%.
Deputy Prime Minister and Minister of Finance Alexei Kudrin predicts that Russia's GDP in 2007 will grow by 7.3%, and investment in fixed assets by an average of 18.2%. Yesterday in the State Duma, he reported that over the nine months of the year, the rate of economic growth in real terms increased by 7.4%. For the same period in 2006, this figure was 6.3%.
Since the beginning of the year, investments in fixed assets have increased by 21.2% compared to 11.8% for the same period in 2006. “In essence, we have doubled the rate of growth in the country’s fixed assets,” said the Deputy Prime Minister.