Russia ranked 52nd in terms of inflation: experts called this an achievement

According to Rosstat, last year inflation in our country amounted to 11.9%. With this level of price growth, the Russian Federation took 52nd place among other countries of the world. This is evidenced by a study conducted by RIA Novosti based on data from the national statistical services of 156 UN member states that published their data on price increases by mid-February. Not only African countries overtook Russia in 2022, but also many “unfriendly” states that imposed sanctions against our country throughout the year. What caused the rise in prices and why very soon Russia in general may turn out to be one of the most prosperous powers in this indicator, experts told MK.

The highest inflation in 2022, according to the study, was recorded in Zimbabwe (243.8%), Venezuela (234%) and Lebanon (122%). The prices rose the least in friendly China (1.8%) and in Oman, famous for its energy resources (1.98%). And the only state in the world where deflation was noted last year was South Sudan, where prices fell by 11.6%.

In friendly Turkey, prices rose by 64.3%. Of the “unfriendly” states of the European Union, 17 of its members were in the top 50, whose price growth rates were higher than those of Russia. On the territory of Ukraine, hostilities are taking place and infrastructure is being destroyed, but its inflation turned out to be lower (26.6%) than in Moldova, where there are no such shocks (30.2%). In Lithuania (21.7%) and Latvia (20.8%), leading a fierce anti-Russian policy and famous for their aggressive rhetoric, the price increase, although it exceeded two dozen percent, turned out to be lower than that of Hungary, which is very restrained in relation to our country (24.5 %). In the allied Belarus, inflation was not much higher than in Russia: the figure was 12.8%. But in Kazakhstan, prices rose more significantly over the past year – by 20.3%. Experts explain the nature of inflation in Russia and in the world in very different ways.

Alexander Razuvaev, Member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers:

“The first wave of global inflation was caused by the consequences of the actions of the ECB and the Fed, who printed a lot of money during the pandemic to support the US and EU economies, which caused a rise in commodity prices around the world. The second wave was related to the situation in the energy market. The third wave that spurred the numbers on the price tags is cost inflation (the so-called increase in cost as a result of an increase in the costs of factors of production, for example, the extraction of raw materials, labor, etc.). The acceleration of inflation leads to the fact that the number of poor and even destitute people is growing around the world. It is impossible to defeat cost-push inflation by increasing the key interest rate of the regulator, in our case the Bank of Russia, in the case of the USA – the FRS, in the case of the EU – the ECB, it is impossible.

It is difficult to say when the wave of rising prices will end. Economic theory says that inflation of up to 20% per year is normal, so our level is quite acceptable. The main thing is that incomes grow taking into account the rise in prices. You can remember the zero years, when inflation was about the same as in 2022 or even higher, but the income of the population grew much faster, so people were very happy. There is no need to dramatize the situation in Russia. The jump in prices that we saw is a reaction to the devaluation of the ruble that occurred last year. This year inflation will be at the level of 5-6%. Although, of course, it will be higher for the poorest segments of the population, but this is a general pattern.”

Andrey Loboda, economist, director of communications at BitRiver:

“Inflation became a global problem a year and a half ago. Double-digit figures at the end of the year are not only in Russia, but also in the ten largest economies in the world. The causes of inflation in our country require a special assessment. For 25 years now, the monetary authorities have quite easily solved budgetary issues due to the policy of a weak ruble. The weakening ruble accelerated prices and so it went in a circle from year to year. Inflation in Russia can only be defeated if the ruble is treated with care, the key rate is lowered, and the Russian currency is given the status of a key investment instrument for the Russian economy and private investors. So far, the ruble has not bothered to contribute at least 1% to the NWF basket.

The EU and the US have the world’s largest reserve currencies and can live without turning off the printing press. At the same time, their money is no longer “dissolved” easily, as it was before, around the world. Industrial inflation in the same EU last year exceeded 40%, the cost of food and utilities at least doubled. Such an explosion in prices has dropped the quality of life of Western European neighbors by almost 50%, and this is just the beginning.

There are no sanctions here. The genetics of inflation in Russia and in the West are very different. Prices in the world will continue to rise, because there are more dollars and euros. In Russia, prices are always rising, because the ruble is not allowed to get stronger and foreign currency, as we see, is quietly flowing out of the country.”

Valery Emelyanov, stock market expert at BCS World of Investments:

“Two factors influenced the acceleration of inflation in the world: the delayed price increase due to the large money emission during the fight against the pandemic and the disruption of supply chains. All this was reinforced later by the sanctions and how Russia reacted to them.

For example, there were no sanctions against food and fertilizers, but Russia limited exports to “unfriendly” states, which ultimately hit the weakest countries, primarily the Middle East and Africa, more severely, since they are much more responsive to food shortages. Roughly speaking, a German can pay an extra 50 cents for a loaf of bread by buying grain in Canada, and his well-being will not change much from this. And his basket of consumption of bread takes a fraction of a percent.

In the poorest countries, things are different. For them, even a small shortage of imported food means a few percent increase in the cost of daily expenses, because their basket, unlike the German one, consists almost entirely of food. Therefore, we see that inflation, which was imported to the countries of Africa and Asia, and also affected the countries closest to Russia (Moldova, the Baltic states), peaked precisely there: emissions, a gap with Russia, and plus supply problems played their role.

The sanctions, of course, added to the rise in prices, since, for example, it became more difficult for Russia to supply metals. But inflation in the EU was more affected by the cost of fuel, against which no sanctions were imposed in 2022. Russia itself has cut off gas deliveries and so far the situation looks alarming: a record deficit in the face of a sharp decline in oil and gas revenues due to an embargo and a fuel price ceiling, as well as a sharp increase in spending on a special military operation.

Our state will sooner or later be forced to start issuing money. Perhaps already this year. There are reserves in the form of the National Welfare Fund, there is also the possibility of using internal loans (in fact, this is the money of banks and the savings of citizens). But if the deficit of several trillion cannot be reduced, then inflation may well reach, if not the level of Zimbabwe, then the level of Turkey.”

Artem Tuzov, Director of the Corporate Finance Department of IC “IVA Partners”:

“The energy crisis is raging in the world. Starting from 2021, energy resource prices are breaking records. And countries that do not have their own energy resources are forced to buy them at very high prices. And this pulls prices up for the products of these countries. Most of the EU countries received inflation higher than in Russia. The Baltic countries have achieved inflation above 20%, so 11.9% is not enough against this background. In general, this is an achievement against the backdrop of the sanctions that were used against the Russian Federation in 2022.”