In offense at the ruble

The main event of the year, residents of Russia consider rising prices and the depreciation of money. These are the results of the next sociological survey thatthe Levada Center presented on Thursday. For the question of which of the events of 2016 you consider the most important, a number of answer options were offered to choose from. And 30% of all respondents put in the first place it was inflation. In second place (28%)-the election of Donald Trump by the President of the United States, in the third (23%)-the Olympics in Rio de Janeiro and the departure from the participation of Russian athletes due to a doping scandal. For comparison, last year, as the VTsIOM survey showed, the main event was named the Russian military operation in Syria - then 43% of all respondents were put in first place. Moreover, the choice of the 2016 event was made against the background of and more than a double slowdown in inflation, and strengthening the ruble by more than a quarter. Why?

An increase in prices in Russia over the past 12 months has slowed almost two and a half times. According to Rosstat, in December 2015, annual consumer inflation in the country was 12.9%, in November 2016-5.8%, in December 5.5-5.6%are expected. The Russian ruble exchange rate for the dollar for the period from the day of its next minimum , January 22, increased by 27%in general. Nevertheless, it is the increase in prices and the depreciation of money that most participants in the sociological survey conducted from December 9 to 12 of the Levada Center called the main event for themselves last year.

Once again, it looks as if the population and statistics see and talk about certain “different” prices for the same goods. How to explain such a discrepancy?

The growth of these income led to the fact that the economy was forced to “digest” more money than it could actually “digest”.

Mikhail Khromov , Head of the Laboratory of Financial Research of the Gaidar Institute of Economic Policy:

- I would say that they are not talking about “different” inflation, but in different languages. Rosstat fixes the increase in prices for the year, which really slows down from month to month recently. The population looks at the absolute level of prices, which continues to grow. And, apparently, the accumulated price increase has now reached a certain critical mark when the buyer sees that for most goods prices have risen recently, if not at times, then at least very much. Say, some product cost, like, more recently, 50 rubles. In the first year, the price has grown to 80 rubles - this is a lot, but, it seems, so far - one order of size. And the next year, the price grows less, only 20 rubles, but in the end reaches 100 rubles. And the buyer perceives this as a critical significance-the prices have doubled! .. This conditional example shows that, even despite the decrease in inflation, the consumer psychologically “tired” from this in the second or third year of continuous growth in price. After all, he sees that in the end prices rose very much ...

Nikolai Kondrashov , leading expert at the Research Institute “Development Center” of the Higher School of Economics:

- The fact is that, despite the really very strong slowdown in inflation, this is simply not in the heads of the population. People are convinced that statistics are not true, but what they see is true ! But there are several problems. Firstly, the buyer poorly distinguishes between “seasonal” prices and “sustainable”. For example, if tomatoes in the season cost 40 rubles per kilogram, and outside the season - let's say, 140 rubles, then the population seems that prices are rising much more than they really rose. Secondly, the buyer can not always compare their change in the framework of exactly one year. When they ask him how much, according to his estimates, prices rose over the past year, a person can estimate this growth in one, but, say, for the last two years. Especially if prices have risen so much during all these two years. There are some other factors. In particular, a certain sense of “resentment” from the fact that prices have grown very much in recently. People remember well the take-off of the prices that took place in late 2014-early 2015 due to the devaluation of the ruble. And psychologically focused not on what has happened with prices in the last year, but on their growth as a whole since the beginning of the crisis.

Structural restructuring of the economy can only occur with sufficiently high inflation.

Despite a sharp slowdown in prices in Russia in 2016, the inflationary expectations of the population themselves, as the Central Bank noted in its recent statement , is reduced very slowly, and a steady tendency to reduce them was not formed. What should happen or happen for this?

Mikhail Khromov:

- Here, firstly, the psychological factor operates, even if prices slowed down. If it is still fresh in memory that only three years ago the same goods were 1.5-2 times cheaper, then subconsciously a person thinks that price increases are still ongoing . Although according to statistics, he can slow down. Secondly, in recent years we have been living with inflation, which is very rarely reduced to unambiguous levels. And people are not yet used to the fact that prices can remain for some time, if not stable, then very slowly growing. For a fracture of this trend, you just need to live several years with low inflation, with unambiguous growth rates.

Nikolai Kondrashov:

- Inflational expectations of the population, of course, will decrease. But only after a strong increase in prices during the acute phase of the crisis of 2014-2015 begins to be forgotten in the minds of people. It is necessary that at least one or two years need to go. Of course, and then inflationary expectations will still exceed real inflation, but at least they will be significantly lower than today. The current inflationary expectations of the population are about 12-14%, which is significantly higher than the actual increase in prices and the expected inflation in the near future. Here, a psychological factor is important, connected in many respects with a sense of resentment from the fact that prices have grown very much before.

Even despite the decline in inflation, in the second or third year of continuous price growth, the consumer psychologically “tired” from this. After all, he sees that in the end prices rose very much ...

In the latest history of Russia, that is, over the past 25 years, the growth of consumer prices in the country has traditionally, historically, either tall, or very high, or beyond ... For example, 130% in 1995, not to mention 2500% in 1992! It’s hard to imagine this today ... But what fundamental economic reasons for it primarily provided for all these years?

Mikhail Khromov:

- Firstly, most of these 25 years there was a long restructuring of the economy. In the crisis of the 90s, the structure of both production and consumption was strongly rebuilt, which simply could not but manage in the dynamics of prices. This structure changed during rapid economic growth in the first half of the 2000s, and after the 2008 crisis. Which also could not but affect the growth rate of prices. After all, structural restructuring of the economy can only occur with sufficiently high inflation. If prices are not rising, then nothing happens in the economy. Secondly, the Russian economy remains developing. And in such economies, inflation is traditionally higher than in the most developed countries. And if many of them, on the contrary, are faced with the problem of deflation, then for developing, transition economies inflation and 10% are relatively “normal”.

Nikolai Kondrashov:

- In the early years, the government “printed” too much money. Actually, the whole 90s was exactly what happened. In the 2000s, not only the “soft” monetary policy, but also the excessive increase in the money supply in relation to GDP showed. This was due to the increase in oil and gas exports and with an increase in oil prices. The growth of these income led to the fact that the economy was forced to “digest” more money than it could actually “digest”. Yes, inflation slowed down, but due to the “overheating” of the economy, it still remained then higher than the “reasonable” level of 4%for Russia. Relatively “soft” budget policy was reflected in the pace of inflation in the very beginning of the 2010s. And since 2014, more than a double weakening of the ruble led to such a strong increase in prices that it was more or less exhausted only by the end of 2016.