Annual inflation in Russia soared to 16.70%, its highest level in seven years, while the ruble and foreign trade fell after Western countries imposed sanctions over the conflict in Ukraine.
Russia raised its key interest rate in a bid to curb volatility, introduced capital controls, barred foreign holders of Russian assets from selling investments and offered more than 1 trillion rubles in social payments and business support.
“We have certain macroeconomic limits within which we work,” said First Deputy Prime Minister Andrei Belousov. “We have more or less understood the limits that allow us to work without increasing the pressure on inflation.”
Some Russians scrambled to secure essential food in the first days after Moscow launched what it calls its “special military operation” in Ukraine on February 24.
At the end of March, the demand for the most popular and socially important products began to stabilize, Belousov said.
However, sugar and the “basket of borscht”, a Russian version of the Big Mac index that contains the most popular everyday foods, such as potatoes, onions, carrots and beets, increased between 50 and 60% after the sanctions, Belousov told the upper house. parliament.
The price of salt, flour and cereals have risen 10-20%, with stocks now enough to last five to six weeks, he said, compared with more than two weeks for sugar and 10-12 weeks for baby food and preserves.
WEEKLY INFLATION DOWN
Russian weekly inflation fell to 0.66% over the past week, Belousov said, after rising an average of 2% in the weeks after Moscow sent troops to Ukraine.
Inflation in Russia could hit 17-20% this year and the economy could contract by more than 10%, its biggest contraction since 1994, according to Alexei Kudrin, head of Russia’s accounting chamber and a former finance minister.
Production volumes fell about 11% in the industry and commerce sectors, with other sectors contracting 9-10%, Belousov said without elaborating. The sources told Reuters earlier that Russian oil production this week hit its lowest level since mid-2020.
The energy ministry had previously suspended the release of monthly oil and gas production figures, while the central bank stopped releasing foreign trade data, cutting off investors from the most essential data on the Kremlin’s finances.
Russia plans to use all available funds this year for support measures, Prime Minister Mikhail Mishustin said, warning there will be no budget surplus.
Belousov said on Wednesday that budget spending has already increased by 20% in the first three months of 2022 compared to a year earlier.
($1 = 82.6000 rubles)