Russian supermarkets freeze prices for inflation-weary shoppers

GMT 13:10 2015 Sunday ,01 March

Arab Today, arab today Russian supermarkets freeze prices for inflation-weary shoppers

Lots of things freeze in Russia's bitterly cold winters
Moscow - AFP

Lots of things freeze in Russia's bitterly cold winters, but not usually food prices, yet that is exactly what top supermarket chains are doing to protect the poor from galloping inflation.
The plunging ruble and a Russian embargo on European Union and US food products in retribution over Ukraine sanctions has resulted in prices for many goods skyrocketing.
The ACORT trade association, which includes major supermarket chains such as Magnit, X5, Auchan, Lenta and Metro, announced last week that it was freezing prices "on more than 20 socially important items of basic necessity for two months".
The supermarkets said they hope to "contribute to a stabilisation of the situation on the food markets in the interest of consumers" and called on suppliers to help in the effort.
Freezing prices may also be in the interests of the supermarkets although it will eat into their profits, analysts say, as it may help them escape worse measures from the government.
The list of products covered has not been announced, but the newspaper Vedomosti reported that it will include meat, fish, milk, sugar, salt, potatoes, cabbage and apples.
- Hair-raising price rises -
According to official statistics, food prices rose by 15 percent in 2014 and increases have accelerated since the start of the year.
With it taking nearly twice as many rubles to buy a dollar, prices for imported goods have soared.
"I see how much prices are rising every day and sometimes it makes my hair stand on end," said Maria Bunina, a 62-year-old Moscow pensioner.
"I usually fill up a trolley," she told AFP. "A year ago that cost 1,200 rubles ($19.50) and today it costs 2,500 rubles."
The same goes for medicines, most of which are imported. Prices have jumped by as much as third.
A group that unites more than 730 pharmacies has said they will join the initiative by freezing prices on vital medicines for chronic illnesses that are common among lower income groups.
Food and medicine prices are a sensitive issue for Russian President Vladimir Putin, who returned to the Kremlin in 2012 on campaign promises of improving social welfare.
With the ruble having lost nearly half of its value against the dollar, in large part due to the collapse of the global price of Russia's key export earner oil, the government is strapped for cash to fund welfare programmes.
Instead, the authorities have turned to a series of highly-publicised inspections to ensure shops and market traders are not price-gouging.
Spectacular cases of a 163 percent jump in cabbage prices, the cost of cucumbers rocketing 478 percent and tomatoes 338 percent were uncovered.
-  'Lesser evil' -
Faced with the prospect of greater crackdowns, inflation-linked losses from freezing prices on some basic necessities may be the "lesser evil", according to economists at Alfa Bank.
They called the initiative "an attempt to show a united front in a context of rising pressure from the government to contain inflation".
Meanwhile, analysts at VTB Capital said they believe "country-wide price controls are unlikely".
Nor do they "view retailers' current proposals to fix prices for selected (products) as a material profitability threat," although they expect margins to be squeezed.
Consumers are also somewhat sceptical.
"Maybe it isn't a bad thing they are fixing prices," said Bunina, "but they are fixing them at today's prices and not the previous ones, when a litre of milk is costing me 60 rubles instead of 30."
Alfa Bank estimated that a price freeze could cover about a third of the average shopping basket and so reduce inflation by half a percentage point.
VTB Capital expects food price inflation to hit nearly 22 percent in the first quarter and average 18 percent in 2015, with the share of food in household spending to increase to 55 percent this year.
Higher prices and the lower purchasing power of Russians may lead to a drop in overall retail sales by eight percent, according to Alfa Bank.
Real wages were down eight percent year-on-year in January.
"Russia's economy is starting to feel the effects of lower oil prices and the steep fall in the ruble at the end of last year, with consumers bearing the brunt of the economy's problems," said economists at London-based Capital Economics.
The government forecasts the economy will contract by three percent this year, but many economists are more pessimistic.

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