Borscht inflation shows price shocks in Russia are hard to escape

Even Russian-grown staples are soaring, providing a glimpse of the difficulties ahead for consumers after waves of sanctions following the invasion of Ukraine triggered supply shocks and a sharp devaluation of the currency.

Most of the hearty ingredients needed to make borscht, considered a comfort food in Russia and much of Eastern Europe, saw double-digit price increases in a single week, with onions having climbed by more than 18% and cabbage by nearly 16%. Residents in some areas have had to shell out over 40% more for some of the staples needed to cook a tasty pot, which also includes beets alongside potatoes and carrots.

Overall consumer prices rose 1.16% in the seven days to March 25, down slightly from 1.93% a week earlier, the Federal Service said on Wednesday. statistics. On an annual basis, inflation reached 15.7%, according to the Ministry of the Economy, against 14.5% on March 18.

The disastrous economic costs of President Vladimir Putin’s war in Ukraine are becoming apparent after it triggered a slew of sanctions and prompted foreign companies to pull out of the country. Increases in the so-called “borscht basket” of commodities disproportionately affect the worst-off Russians and can translate into even higher inflation expectations.

Retailers are experiencing a shortage of vegetables, including cabbage and carrots, according to Kommersant, as Russia depletes stocks of last year’s domestic crop while fresh supplies from overseas growers are not yet ready. The Agriculture Ministry on Wednesday sought to reassure Russians that there would be no shortage of vegetables, blaming the price hike on seasonal factors and telling Interfax on Wednesday that shipments of the new crop would stabilize the situation.

A Bloomberg survey of analysts this month showed inflation could average 20% this year, the fastest in about two decades. Russia’s economy is on course to contract in two consecutive years for the first time since the collapse that followed the Soviet break-up three decades ago.

A wave of panic buying that took hold in Russia after its attack on Ukraine in late February initially led to a dramatic increase in the cost of durable goods like cars and televisions. But it is the cost of commodities that is currently under pressure as consumers try to stock up for the future.

Sugar prices rose an average of 6.5% in the week to March 25. Matches became 3.3% more expensive and the cost of toilet paper increased by 2.9%.

© 2022 Bloomberg

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