Since invading its neighbor Ukraine, the cost of living in Russia has increased significantly. According to official figures, sugar and other household staples have risen in price by 14%, and that’s just over the past week. In some parts of the country’s, sugar has risen by nearly 40%.
Ruble down – cost of living up
Economists say that inflation is about to accelerate after the ruble, Russia’s currency, fell sharply. The ruble has lost 22% of its value since February 24th.
If a country’s currency devalues, imports become more expensive, which pushes up inflation. A falling ruble should be good for exports. However, as most of the world has imposed economic sanction against Russia, it won’t be able to benefit.
The Moscow stock exchange resumed trading on Thursday after a hiatus of one month. However, foreign investors are not allowed to sell shares. Most traders described the reopening as a “sham.” There is also a ban on short-selling.
The BBC quoted Stephen Innes, of SPI Asset Management, who said the following regarding the culprit of rising prices:
“The biggest culprit is imported inflation. Anything Russia imports is exponentially (pricier) due to the weaker ruble.”
Russia’s central bank has increased its interest rate to 20% in the hope of stopping the continued slide of the ruble.
Russians worried sanctions will cause economic collapse
Russian politicians and ordinary people are terrified that sanctions will soon lead to total economic collapse. The country is facing its worst economic crisis since the 1990s.
Economists at Goldman Sachs predict that Russia’s GDP (gross domestic product) will shrink by 10% this year, after already contracting during coronavirus pandemic.
In an interview with the UK’s Daily Express, Kevin Connolly, the BBC’s former Moscow correspondent, said:
“You’re going to see rampant inflation in Russia and there will be some shortages in shops. There were already shortages of goods from the European Union because there was a mutual exchange of sanctions after the invasion of Crimea.”
Years of progress erased
Whatever progress the Russian economy made over the past couple of decades will be erased because it invaded a peaceful neighboring country.
In just one month, President Vladimir has managed to unify all NATO countries and get most of the world to impose economic sanctions against Russia. He has also shown us how weak and disorganized his armed forces are.
