The indicators turn red one after the other. Inflation, which has been spiking in Russia for months, accelerated further in April, reaching 17.8% year-on-year, a level not seen since 2002, notably around 20, according to Rosstat data released on Friday. 5% up. Commodities are among the most affected: cereals (+35.5%), pasta (+29.6%), butter (+26.1%) and fruits and vegetables (+33.0%).
Prices of audio-visual equipment such as televisions increased by 22.7%, while prices of building materials increased by 27.5%. Compared to March this year, prices in April increased by 1.6%.
Inflation could reach 23% by 2023
For all of 2022, annual inflation could reach 23% before slowing next year and returning to the 4% target in 2024, according to the Central Bank of Russia. Inflation, which has been galloping for months, is linked to the post-pandemic recovery and soaring commodity prices, now compounded by Western sanctions on Russia and their share of logistical disruptions. “Inflation is expected to remain high even as it slows. There is a lingering effect of inflation,” explained Julien Vercueil, economist at Inalco, at a recent CEPII conference.
The rise in prices is eroding the spending power of Russians who have little to save and worries authorities who have attempted controversial price control measures. This inflation will also create major difficulties for many sectors that have already been hurt by the two long years of the pandemic.
The central bank raised its interest rate sharply to 20% in the first sanctions following Russian troops invaded Ukraine in late February, before embarking on a gradual decline. It is currently at 14%.
President Vladimir Putin assured on Thursday that the West has suffered more than Russia from the sanctions imposed on Moscow over the offensive in Ukraine, and boasted of a strong resistance from Russian business in the face of “external challenges”.
A dizzying recession in 2022
The extent of the recession is still difficult to assess at this time, but most economists are expecting a catastrophic fall in gross domestic product this year.
After collapsing -3% in 2020 and rebounding to 4.7% in 2021, GDP could fall to staggering levels again this year. “Gross domestic product (GDP) will fall sharply, by 5%, but maybe 9% in 2022. Never before has Putin’s Russia experienced a recession like this. said Julien Vercueil, one of the few French economists specializing in Russia. Of course, this drop in activity could do immense damage even if the Russian authorities and central bank continue to take massive action.