Ministry of Finance: the growth in the cost of products is associated with overheating of the market

There are signs of overheating in the Russian consumer market, the most acute situation is with food prices. This is stated in the main directions of the budget, tax and customs tariff policy for 2022 and for the planning period of 2023 and 2024, developed by the Ministry of Finance as part of the budget package submitted to the State Duma.

The Ministry of Finance considers outstripping growth in demand in 2021 in relation to production capabilities to internal prerequisites for overheating. Among the external factors, the agency calls the budget-credit "pumping" of money in developed countries and the global shortage of production capacity in certain product groups. These factors, according to the ministry, form an increased inflationary background.

Food prices are rising at a faster pace, the document says. So, according to the latest data from Rosstat, the increase in the cost of goods and services in August this year compared to August 2020 was 6.68%. Moreover, the cost of food products for the year increased by 7.7%. Of food products, SUGAR (by 38.1%), sunflower oil (by 27.3%) and eggs (by 15.4%) rose the most.

Daria Snitko, HEAD of Gazprombank's Center for Economic Forecasting, said that across all food markets in RUSSIA, there are more signs of growth than price declines. In 2021, according to her, the decline in supply, which was not so noticeable during the pandemic due to the contraction of demand in the domestic market, continues. “Against the background of the normalization of demand, this provokes the appearance of imbalances. For example, this situation is very typical for the MEAT market: production is falling for both poultry and pork,” the expert said.

According to Snitko, the introduction of EXPORT duties and price restrictions for the main Russian agricultural exports reduces interest in sowing: in 2021 - sugar beets, and now - grains. “By reducing the area of ​​winter crops compared to last year, it is already clear that the imbalance in supply and demand for the main grains may persist for the next season,” the expert predicts.

Today, the growth in the cost of food in Russia is caused by many factors, says Georgy Ostapkovich, DIRECTOR of the HSE Center for Market Research. “I agree that there is an overheating of supply and demand right now, but it seems to me that supply is not keeping up with demand. The reasons for this lie in productivity, production capabilities, and so on,” he said.

Another factor in price growth, according to Ostapkovich, is the monopoly of agricultural holdings and retail chains, "which set inflated exit prices." “In the middle of the chain there is a wholesale link and intermediaries who also need to earn. Plus the cost of logistics, gasoline and so on. All this affects the cost, — said Ostapkovich. “Besides, producers aim to export their goods because it is more profitable. All these factors together affect prices, causing them to rise. This is a simple force majeure related to the pandemic. During global crises, all goods and services always rise in price. You just need to survive it, you won’t be able to fight it.”

According to Ostapkovich, the balance of supply and demand will be restored when the sanitary situation improves. “I think that food inflation will exceed 7% by the end of the year. The consumer price index will be approximately 6.5-6.7%. On average, all foodstuffs can rise in price by almost 8%. Some items can increase in price by almost 20%. It will depend on the yield,” the expert predicts. In September, the Ministry of Economic Development worsened its inflation forecast for 2021 from 5% to 5.8%.

Ostapkovich believes that the main problem is not the increase in prices, but the low incomes of the population. “The task is to help this category of people. In 2003-2008, the Russian economy grew, inflation did not fall below 10%, but everything was in order, because incomes increased by 12% per year, the expert recalled. — Now the incomes of the population stand still and even fall. We need to start distributing food cards for at least 1-2 thousand rubles. per month".

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A similar opinion was repeatedly expressed by many industry experts, and the relevant ministries took the initiative. So, in February 2021, the Ministry of Industry and Trade once again offered to provide food support to certain categories of the population. Experts and representatives of agricultural holdings interviewed by Agroinvestor also stated that supporting the poor is more effective than curbing price increases.