Russia to set new inflation record

Russia to set new inflation record

Russia’s consumer price inflation will be significantly lower than the official forecast of 3.8% in 2019, Economic Development Minister Maxim Oreshkin said.

"We see that inflation will be significantly lower than our forecast of 3.8%," the Prime news agency cited the minister as saying.

"The figure will go noticeably below that on the background of weak demand and continuous slowdown in lending," Oreshkin expects.

The minister also said that the ministry will not change its 2019 forecast of a 0.1% increase in real disposable income of Russians in spite of a hike in July–September.

He added that the ministry has seen no reason to change its forecast for 2019 so far. "Quarterly figures are always volatile, so far we plan to adhere to the figures that we’ve calculated," Oreshkin added.

The inflation forecast was earlier set at 3% for 2020 and at 4% for 2021–2024.

The professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, speaking to Vestnik Kavkaza, noted that the current decline in inflation is a symptom of falling consumer demand: no sales - no price increases. "Inflation in Russia is slowing down indeed. In my opinion, it is mainly caused by the oppressed solvent demand of the population," he said.

"The most dangerous economic phenomenon is a decline in prices, because it includes the motivation for consumers to buy nothing and wait for prices to decline even more. If we have increased inflation of about 4% during economic development, that is, as a result of economic growth, then this is normal. If we have inflation of 2-3% as a result of oppression of consumption and incomes of the population, then this is a negative phenomenon," Alexander Abramov drew attention.

Advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house Sergey Hestanov, in turn, recalled the protective measures of the Central Bank. "The Central Bank has been preparing for inflation for a long time and continues pursuing a rather tight monetary policy. This was partly justified by an increase in VAT, but by the middle of the year inflation began to slow down, so the Central Bank made a statement that it might mitigate monetary credit policy. In this regard, I think that fears of too low inflation are somewhat redundant: as soon as the Central Bank policy softens, inflation will reach 4% at the first or second quarter of next year," the expert expects.