Americans have spent the last few years complaining about inflation. But price rises in Russia are eye-watering by comparison – and just one symptom of an economy that is overheating.
Butter, some meats, and onions are about 25% more expensive than a year ago, according to official data. Some supermarkets have taken to keeping butter in locked cabinets: Russian social media has shown stocks being stolen.
The overall inflation rate is just shy of 10%, much higher than the central bank anticipated.
Inflation is being driven by the rapid rise in wages as the Kremlin pours billions into military industries and sends millions of men to fight in Ukraine. In the middle of a war, companies outside the defense sector can’t compete for workers without paying much higher wages. In turn, they charge higher prices. So the spiral continues.
“Prices are rising because of the war,” Alexandra Prokopenko at the Carnegie Russia Eurasia Center in Berlin told CNN. “Demand in the economy is distorted in favor of unproductive spending. Wages rise because employers have to compete for labor.”
Other economists dub this as growth without development. National income grows, but there is no broad improvement to health, education, technology and infrastructure.
In an effort to cool inflation, the central bank raised its key interest rate in October to a record high of 21%. But an influential group of Russian economists said on Telegram this week that “increased inflationary pressure will not only persist but may even increase.”
Russia’s President Vladimir Putin said earlier this month that the Russian economy needs nearly 1 million new workers because of an unemployment rate of only 2.4%, or “virtually no unemployment,” as he put it.
Putin described Russia’s labor shortage as “currently one of the main obstacles to our economic growth.”
