Rosstat estimated inflation at the end of 2022 at 11.94%

Inflation in Russia at the end of 2022 amounted to 11.94%, follows from Rosstat data. Prices for services increased the most – by 13.19% in December 2022 compared to the same period in 2021. For non-food products, the increase in prices was 12.7%, for food – 10.29%.

In December, in monthly terms, Rosstat recorded an acceleration in the rate of price growth by 0.78% after 0.37% in November and 0.18% in October. Inflation in December was spurred by the indexation of housing and communal services tariffs – services rose in price by 2.04% over the month. Non-food products in December increased in price by 0.05% in monthly terms, food – by 0.60%.

Food prices rose due to a seasonal rise in prices for fruits and vegetables (by 5.83% after 5.58% in November) and a resumption of price growth for other food products, according to the Ministry of Economic Development’s review “On the current price situation”. Inflation was constrained by a slowdown in price growth in the non-food sector, with the continued reduction in prices for most durable goods, the ministry said in a commentary.

The average annual inflation in the country in 2022 was 13.75%, follows from Rosstat data. The main peaks were in February and March. Price growth in February amounted to 9.15% in annual terms after 8.73% in January, and in March it accelerated sharply to 16.69%. On a monthly basis, the rise in prices in March amounted to 7.61%, which was the maximum since January 1999. In April, inflation on an annualized basis continued to grow – up to 17.83%, on a monthly basis – decreased to 1.56%. In May, inflation fell to record levels, and from June to August, Rosstat recorded deflation in monthly terms.

The official forecast of the Ministry of Economic Development assumed inflation of 12.4% for the year. At the same time, in December, the head of the ministry, Maxim Reshetnikov, noted that it could be even lower – in the range of 12.0-12.4%. Back in mid-May, the ministry predicted inflation of 17.5%.

As Reshetnikov noted at a meeting of President Vladimir Putin with members of the government on January 11, the growth in prices below the forecast was achieved due to the stabilization of prices in the agricultural sector, high yields and the development of distribution channels. The Ministry of Economic Development expects that in the first quarter of 2023 inflation in the country will “substantially decrease year on year”, already in the second quarter the agency predicts inflation below the target level of 4%.

According to the Vedomosti consensus forecast, prices will rise by 6.2% in 2023. The official estimate of the Ministry of Economics suggests a price increase of 5.5%. At the same time, already at the beginning of the year, inflation could reach a target of 4% against the backdrop of a high base in 2022. As a source close to the presidential administration told Vedomosti, in March the figure could reach 3%.

The general trend in the second half of 2022 was towards a slowdown in price growth, notes Alexander Shirov, director of the Institute for Economic Forecasting. At the same time, according to him, the acceleration of inflation in December is natural, because a significant amount of spending by the state, corporations, and the population is concentrated at the end of the year – this forms a cash overhang. According to Shirov, inflation in December was affected by the acceleration of budget spending and the depreciation of the ruble. The main thing that is holding back prices now is low domestic demand, both investment and partly consumer, he points out.

Inflation in December in monthly terms was abnormally low, says Alexander Isakov, chief economist at Bloomberg Economics. According to the analyst, this is due to a decrease in the growth rate of prices in products – on average over the past 5 years in December it was 1.5%, and in December 2022 it was two times lower – 0.7%. The decrease in inflation in food compensated for 3/4 of the contribution from the increase in utility tariffs, Isakov calculated. In general, the contribution of indexation of housing and communal services amounted to 0.4 percentage points, the expert estimated.

In October, the government decided to postpone the indexation of tariffs for gas, electricity transmission, water and heat supply from July 1, 2023 to December 1, 2022. The Ministry of Economics reported that the maximum level of indexation in the country would not exceed 9%.

The fall in prices for granulated sugar, the low rise in prices for chicken eggs look uncharacteristic for December, Isakov notes. At the same time, price growth in non-food products looks normal by historical standards, so the conclusions about low consumer confidence do not look convincing and are not consistent with wage growth in recent months, the analyst emphasizes.

In general, at the end of the year, the price dynamics turned out to be better than most experts predicted in the first half of the year, Shirov points out. This was facilitated by the measures of the Central Bank – the regulator raised the key rate in time and began to lower it in time, reacting to the panic, as well as the strengthening of the ruble, which led to a decrease in import prices, primarily for non-food products (household appliances, cars), the economist believes. On February 28, the Bank of Russia raised the rate from 9.5% to 20%.

Inflation in 2022 was lower than expected due to three factors, Isakov said. First, the strengthening of the ruble and parallel imports led to the fact that prices for electronics turned out to be lower than a year ago. Secondly, the system of dampers for oil products built since 2018 kept fuel prices down, for example, the cost of motor gasoline almost did not change over the year. Thirdly, the record harvest led to the fact that food inflation was lower than other goods in the consumer basket.

At the end of the year, the INP RAS predicts inflation of 5-7%, while the external conjuncture can greatly change the parameters – if the exchange rate exceeds 73-75 rubles. per dollar, then inflation will be higher, says Shirov. Isakov expects that inflation could reach about 5.5% in 2023. According to the economist, two conditions must be met for this: a good harvest, which is important given the high share of food in the consumer basket of Russians, and curbing the growth of budget spending near 30 trillion rubles .