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Thursday, June 08, 2006

Inflation "only" 9% for Russia's rich, 12-16% for Everybody Else, Russia Spirals to Doom

Kommersant reports that the Kremlin is proud to have reduced inflation to "only" 9% for the rich (a rate that would be viewed as utter ruination in any other G-8 country), while for the poor inflation has not dropped a farthing:

Inflation Not to Go Down for Poorest

The government will curb inflation to 9 percent in 2006, Economic Development and Trade Minister German Gref told the ministers yesterday. Regardless, the poorest in Russia will hardly notice this achievement of the cabinet, as the cost of minimal food basket and public utilities has increased 11.7 percent and 15.7 percent respectively since early this year vs. just the 5.9-percent advance of consumer prices in general. The prices grew 5.9 percent from this January to May, Economic Development Minister German Gref reported to President Vladimir Putin early this week. “It is 1.4 percent lower than past year,” the minister pointed out. But the increase in food/public utilities prices was far ahead of the pace shown by consumer prices in general, and this price behavior hasn’t been mentioned by the minister.The cost of housing and public utilities increased 15.7 percent during five months of this year, Russia’s Statistics Committee said in the report released June 6. The growth ceiling is 20 percent for this year under the federal law on regulating utilities' rates. Apart from utilities, another vital indicator for the poorest is the cost of minimal food basket. In growth, it was well ahead of inflation, having gained 0.5 percent in May and 11.6 percent during five months of this year, according to Russia’s Statistics Committee. But if the government has endeavored to federally curb prices for public utilities by releasing respective regulations, it cannot apply this method when it comes to the food prices.

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