Russia’s soaring inflation is hitting basic supermarket staples with the price of potatoes rising a staggering 64%.
The increased cost of spuds has been put down to bad weather, rising production costs, wage increases and a shortage of labour amid Russia’s war in Ukraine.
Rosstat figures show Russians face widespread food price rises, with reports people are even stealing butter, the price of which has risen 27.5% this year, according to figures cited by Business Insider.
Vladimir Putin’s continuing war against Ukraine has pushed inflation well above Russia’s target levels.
Russia’s central bank said seasonally adjusted inflation rose to 9.8% in September, up from 7.5% in August. In a desperate attempt to curb price rises, the central bank raised its headline interest rate to an all-time high of 21% in October.
Bread, dairy, chocolate and beer suppliers in Russia previously warned retailers of looming price increases up to 40%, according to business daily Kommersant.
German chocolate maker, Ritter Sport, which operates in Russia, announced plans to hike prices by 40% from last September while Mars warned of increases up to 19% on some of its products.
Russia’s record high interest rates are putting firms at risk of defaulting on loans, including in the country’s defence industry.
Oleg Kuzmin, an economist at Renaissance Capital, warned highly leveraged companies are particularly in danger, as they often rely on new loans to pay off old ones. But with record high interest rates, that option is becoming unaffordable.
Corporate bankruptcies have already risen by over 20% in the first nine months of this year compared to 2023, and there are fears it could soon rise even higher.
The Russian central bank’s interest rate hike is also likely to have dire consequences for Russian mortgage holders, as banks raise their interest payments.
Analyst, Alexander Mertens, writing for the Atlantic Council, said while the Kremlin and many international analysts insist Russia’s economy is in good shape, the country’s long term outlook “is becoming increasingly precarious”.
He said: “If the war continues for an extended period and is accompanied by factors including increased sanctions, inefficient military leadership, and pervasive corruption, this could plunge Russia into a severe economic recession.”
Mr Mertens added that Russia’s unprecedented military spending since the full scale invasion of its neighbour in 2022 has made the Russian elite richer, boosted domestic demand and overheated the economy.
He said if the war ends then Russia’s fiscal stimulus will cease, potentially causing a significant drop in real incomes for many Russians, threatening Putin’s regime.
Tightening sanctions, dwindling export revenue and limited access to the tech required to extract Russia’s natural resources pose mounting challenges, according to the expert.
