Consumer Prices Set to Explode

Inflation and consumer prices are set to jump in early 2008, according to both independent analysts and the Russian Finance Ministry. predicted that many items will grow more than 10 percent before spring.

Prices were frozen by the government in mid-October, in an effort to delay the effects on ordinary citizens, and to ensure stability before December State Duma elections. Alexei Kudrin, Russia’s Finance Minister, noted that “Freezing prices was a voluntary act on the part of private enterprise in response to a request from the Russian government: both understood the importance of the pre-election time.” The price agreement expires on February 1st.

Inflation, which was previously forecast at around 8 percent for 2007, is now expected to reach 12 percent for the year. Speaking to RIA Novosti, Kudrin attributed the increase to high oil prices, rising worldwide food prices, and a large influx of capital into Russia. Some analysts added that the rising price of crude has led to a fuel shortage inside Russia, as oil producers rush to the export market.

While some analysts remain pessimistic about 2008, the Finance Ministry is hopeful about the future. “We have already counted these factors into next year’s prognosis, and we expect a reduction of inflation to 8.5 percent,” Kudrin said.