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How prices in Russia's regions will rise in 2024
What is the danger of inflationary inequality between regions?
How the authorities fight price growth
How to reduce inflationary inequality in the Russian Federation
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Annual inflation in 20 regions became double-digit and exceeded 10%. Among such subjects are Chuvashia, Dagestan, and the Tambov Region. At the same time, in some regions, such as Chukotka and the Nenets Autonomous District, price growth is at the level of 5-6%. And as "Izvestia" found out, inflation inequality in Russia has increased. This is due not only to climate and weather conditions, but also to different levels of staff shortages and business structure. Last week, Vladimir Putin urged the authorities to step up to slow down price growth. What they can do and to what level they will be able to reduce inflation in 2025 - in the material of "Izvestia".

How prices in Russia's regions will rise in 2024

Inflation in Russia's regions in 2024 was unevenly distributed. According to the results of December, in 20 subjects, price growth accelerated above 10%, as follows from the Rosstat data (Izvestiya analyzed them). Among them are Buryatia (10.53%), Altai (10.55%), Mari El (10.65%), Sevastopol (10.69%), Tambov region (10.8%), Dagestan (11.03%), Chuvashia (11.04%).

In the aggregate, inflation above the national average (9.5%) was recorded in 39 regions of the country, Rosstat specified to "Izvestia".

However, 46 subjects could also boast of inflation below the average level. Chukotka Autonomous Okrug (5.11%) was the closest to the 4% target. Almost 1 p.p. away from it was the Nenets Autonomous Okrug, where the price growth reached 6.26%, and in third place was the Sakhalin Oblast (7.15%).

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Photo: TASS/Kukhmar Kirill

At the same time, the inflation inequality of the regions is increasing. The difference between the subject with the fastest price growth - Chuvashia (11.04%) and the slowest - Chukotka (5.11%), last year amounted to almost 6 p.p. At the same time, a year earlier it was lower - about 5.5 p.p., Rosstat specified.

The editorial board sent inquiries to regional governments. The Crimean Ministry of Industry and Trade said that the most expensive food products in 2024 were potatoes (by 84.4%), butter (41.5%) and frozen fish (34%). At the same time, the press service of the head of Chuvashia reported that prices rose most of all in telecommunications (by 18.5%), household services (17%) and services of cultural organizations (15.9%). Among food products, butter (46.4%), fish and seafood (23.6%) became more expensive.

Inflation is now one of the most alarming topics for the authorities. It was the subject of the first economic meeting of the President this year. On January 22, Vladimir Putin urged the government to step up its efforts to fight rising prices.

What is the danger of inflationary inequality between regions?

Recently, the spread of inflation across regions has increased, the Central Bank's press service confirmed the trend to Izvestia. The main reason is that the structural adjustment of the economy, which began in 2022, is proceeding unevenly: in those subjects that have already had time to adapt to the new conditions, the situation with prices is more stable.

The regulator's press service also added that a lot depends on the geographical location. The severity of climatic conditions in many places does not allow growing fruits and vegetables, so they may be less available, explained Svetlana Frumina, Acting Head of the Department of Global Financial Markets and Fintech at Plekhanov Russian Economic University. Regions that are used to it and have established their own production were able to smooth out the disproportions by their own efforts.

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Photo: Izvestia/Anna Selina

But in the southern regions a lot depends on weather conditions. If they are unfavorable, the volume of agricultural products decreases, which makes them more expensive, the Central Bank also reported. For example, in Dagestan in December, the annual increase in food prices amounted to 14%, and 19% for fruit and vegetables, said Olga Belenkaya, head of macroeconomic analysis at Finam.

Another reason for inflationary inequality is the speed of wage increases. According to Svetlana Frumina, the increased salaries have remained in the activities related to IT and financial sector - employees of such companies can exceed Br400 thousand monthly. The rapid growth of salaries and shortage of personnel accelerate inflation.

However, industrialized regions have additional prerequisites for easing inflationary pressure due to the outstripping growth of supply of goods and services, believes independent expert Andrei Barkhota. In addition, in the northern regions, as a rule, the price level itself is higher, so sellers cannot afford to increase the cost of products as quickly as they do in subjects with basic low prices.

Differences in the dynamics of inflation in the regions are due to many factors: the balance of supply and demand, differences in the structure of costs, including transportation, as well as the level of competition, summarized in the Ministry of Economic Development.

How the authorities fight price growth

One of the main tools for slowing down inflation is raising the key rate. The Central Bank started this cycle a year and a half ago.

- Without the rate hike, inflation would have been much higher. We have been calculating alternative scenarios. And if we, for example, left the rate at the level it was from the fall of 2022 to the middle of last year, that is, 7.5%, then inflation would not just be double-digit, it would be much higher than 20%, and possibly 30%," Central Bank head Elvira Nabiullina said in December.

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Photo: Izvestia/Mitriy Korotayev

The press service of the Ministry of Economic Development told Izvestia that specialized regional and federal agencies are now increasing the supply of goods and services on the market to curb inflationary fluctuations both in the country as a whole and in individual regions.

According to the Ministry, the FAS analyzes the level of competition along the entire chain "from producer to shelf", takes measures to develop it and eliminate market monopolization.

Regional authorities are also taking their own measures. The Ministry of Industry and Trade of Crimea said that they signed an agreement with local businesses - their representatives voluntarily decided not to exceed 5% of the trade markup on socially important food products: sugar, rice, bread, dairy products.

The situation is similar in Chukotka, where inflation just happens to be the lowest in Russia. There the list of trade organizations that have joined the agreement with the regional government on price restraint and establishment of marginal mark-ups for a number of food products has expanded, said Olga Belenkaya from Finam Financial Group.

How to reduce inflationary inequality in the Russian Federation

Differences in price growth by regions can lead to a widening gap between living standards, said Olga Belenkaya. This may result in the outflow of able-bodied population from less attractive regions, as well as in a decrease in the effectiveness of a unified (within the country) monetary policy.

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- Overcoming inflationary inequality is possible through a targeted expansion of the supply of goods and services in regions with high inflation. This can be done by building roads, vegetable storages, stimulating the development of agriculture, industry and retail trade," says the expert.

However, experts believe that the situation with inflation this year will improve in the country as a whole - price growth by the end of 2025 will be no more than 8%, unless there are some external shocks. However, according to independent expert Andrei Barkhota, the gap between regional inflation rates will be eliminated only after five to seven years of progressive and crisis-free development.

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