Issue 4349. Last Updated: 03/15/2010

Europe's Food Inflation 1/10th That of Russia

By Ira Iosebashvili
Russian food prices have soared in the last few months, outpacing the rise in European food prices by a factor of 10, the State Statistics Service reported Monday.

Food prices increased by 5.8 percent from January to April of this year, nearly 10 times the 0.6 percent rise seen in the European Union.

The biggest rises in the four-month period were seen in prices for fruit -- which spiked 17 percent in Russia while rising only 1.9 percent in Europe -- and sugar, jam, honey, chocolate and confectionery goods, which jumped by 12.7 percent and only 1.5 percent in Europe.

Prices for vegetables in Russia shot up by 11.6 percent, fish and seafood became 9.4 percent more expensive and meat rose by 4.6 percent.

Overall consumer price growth in Russia was 6.2 percent in the January-April period, compared with the 0.6 percent growth in consumer prices that the EU experienced.

Analysts said the discrepancy in prices was the work of several factors, including weakness in the ruble during the early part of the year.

Tumbling oil prices and a spate of dire economic news caused the ruble to slide from a high of 34.12 against the euro last October down to 46.37 on Feb. 9. The currency has since bounced to 43.43 as oil prices have climbed in the last few months.

The weak ruble pushed food prices up because Russia imports 25 percent to 30 percent of all the food it consumes, said Vladimir Tikhomirov, chief economist at UralSib.

A lack of competition among retailers and food importers also played a role, he said.

"The Russian market is monopolized by several big companies that dictate prices, and this helps create an inflationary environment," he said.

Tikhomirov said the growth in prices would likely ease in the near future as the economy stabilized and produce became more available during the summer months.

Russia's inflation rate in the year through May 12 was 6.5 percent, compared with 6.8 percent in the same period last year, the State Statistics Service said last week.

It fell more than expected in April to 13.2 percent as the struggling economy slowed growth in prices and the effect of the ruble's devaluation ebbed, the service said.

The Economic Development Ministry forecasts inflation of 13 percent to 14 percent this year, and Finance Minister Alexei Kudrin said in March that he expected the rate to slow in the second half of 2009. But other top government officials, including Kremlin economic aide Arkady Dvorkovich, have said it could rise to as high as 15 percent.



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