Inflation Jumps to Double Digits

On October 5th, the Russian Statistics Committee (Rosstat) dropped a bombshell announcement. According to the organization, inflation rose eight times higher in September 2007 as the same month last year, at .8% instead of .1%. These figures largely undermine the stable rate of inflation of past years, and mark the first time that the inflation rate has dramatically increased since 1998. Economic analysts predict that the rate will continue crawling upward, and have dismissed previous assessments of the inflation as overly optimistic.

The rise was felt sharpest by ordinary consumers, who found rate hikes of up to 30 % on such basic necessities as milk, bread and cheese. Rosstat reported that 89 % of food products became more expensive in September, although costs rose across most other sectors as well. A survey led by the Interfax news agency found that 64% of respondents now cannot afford some daily food products because they are too dear.

Experts from various field of agriculture testified in front of the Federal Assembly today in an effort to explain the price hikes. They noted rising world grain prices, increased energy costs, and problems of infrastructure as the major factors. While the government has little control in the first two items, the last has resulted from improper management of the agricultural sector. All of these reasons have no simple, short-term solutions, and many experts believe that the government is virtually helpless to stop further price increases.

In the Nezavisimaya Gazeta, Vladimir Tikhmirov, the chief economist at Ural Sib, predicts that prices will continue in an upward spiral:

If we had implemented structural reforms over the past few years, in the economy as a whole and agriculture in particular, we could have restrained price-rises by increasing food production, relatively painless ruble appreciation, and even cuts in state spending.

Inflationary pressure will intensify in the near future, due to demands for wage increases and rising prices in other sectors of the economy.

Ordinary Russians will continue to suffer and as the instability of the current administration’s policies begins to emerge.

Garry Kasparov, leader of the United Civil Front and Other Russia presidential candidate, commented on the false image of Putin’s policies on Ekho Moskvy (Echo of Moscow):

It seems to me, that behind the surface, and in my opinion, illusory stability, there is a hidden heap of problems, which the authorities cannot combat, because they cannot even correctly formulate the challenges facing the country. It appears to me that a number of crises will mount in the near future. There will undoubtedly be a crisis of the infrastructure, which is crumbling, and into which we need to invest. But the authorities as of yet have not proposed any sensible program or solution.