Russia is preparing for consumer prices to rise at the fastest pace since 2010 after President Vladimir Putin banned food imports from the U.S. and its allies and backed a sales tax, according to three officials.
Annual inflation is likely to accelerate to 8 percent in 2015, far above a 4.5 percent target, the officials said, asking not to be identified as the information isn’t public. Prices may grow 10 percent next year for the first time since 2008 if tit-for-tat sanctions escalate, two of them said.
With inflation at the top of Russians’ concerns, the central bank is fighting to rein in price growth, which exceeded its target for a 23rd month in July. The battle will prove harder after Russia blacklisted $9.5 billion of agricultural products and food last week to strike back at the U.S., the European Union, Norway, Canada and Australia for sanctions rolled out amid the conflict in Ukraine.
Metro AG’s Cash & Carry unit in Russia said vendors are seeking to charge 4 percent to 10 percent more for supplies. The stores have run out of imported salmon and cheeses such as Parmigiano-Reggiano, Camembert and Brie, and the retailer is looking for replacements, according to an e-mailed statement.
Russia’s Federal Anti-Monopoly Service has pledged to watch for jumps in food prices and asked residents and the country’s biggest retailers to report increases as the government seeks to avoid discontent among consumers and play up the benefits to domestic producers. The Prosecutor General’s Office said today it plans to create a group to fight any violations that may push up food costs.
The food import ban hasn’t yet accelerated price growth because some stockpiles are left and demand is lower now during summer, the Economy Ministry said on its website today.
Still, people are set to feel the impact in their shopping carts, and consumer demand has already cooled, dragging on the economy. Adding to the pain, the government plans to allow regional governments to introduce a sales tax next year of as much as 3 percent to bolster their budgets.
Putin’s food ban alone may add about 2 percentage points to inflation in the next 12 months, the officials said. It’s sped up from a record low of 3.6 percent in May 2012 to a 7.5 percent in July, according to data compiled by Bloomberg.
Earlier decisions by Russia’s food safety watchdog to block pork imports have already added 1 percentage point to inflation this year, Natalia Orlova, chief economist at Alfa Bank in Moscow, said by phone. The bank raised its 2015 inflation forecast to 8 percent.
The government has resisted revising its macroeconomic forecasts for next year, but it may review targets at its Sept. 4 meeting, when the budget draft will be discussed, the officials said.
Russia’s central bank has said consumer-price growth will reach 6 percent to 6.5 percent this year, missing its 5 percent target. The regulator is reviewing all its estimates, taking into account “all factors,” and will announce updates in September, its press service said in an e-mailed response to questions.