​Inflation y-o-y to reach 20% soon and erode domestic demand

RUSSIA ECONOMICS - In Brief 31 Mar 2022 by Alexander Kudrin

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Rosstat reported that inflation w-o-w in seven days ending on March 25, reached 1.16%. Prices keep rising across the board. Inflation MTD and YTD reached 6.60% and 8.91% while y-o-y figure moved up to 15.66% as estimated by the Economics Ministry. Inflation w-o-w moderated but it is likely that in March as a whole it will move to 16.6%-16.7%. In April it will get close to 20% and then may stabilize at around this level for some time – assuming no more major sanctions and shocks coming.Rosstat also reported that major macroeconomic indicators were good in February, though trends will deteriorate in March. In some sectors, such as transport, this deterioration was already seen in February, as the last week of the month was impacted by the military activity in Ukraine. In February, the output of the five basic sectors (industry, agriculture, trade, transport, and construction) grew by 5.7% y-o-y, while in 2M22 y-o-y growth was stronger (7.1%). Retail sales were up by 4.7% y-o-y in 2M22 but one cannot rule out that y-o-y growth of retail sales can turn negative amid accelerated inflation These figures will change considerably in the rest of the year but they clearly show that the Russian economy was in a good shape until February 24, the starting day of the operation.Evgeny GavrilenkovAlexander Kudrin