Russian Experts Predict End of Inflation and Onset of Deflation in Coming Months
Experts interviewed by the Russian newspaper Izvestia predict that the price growth in Russia will almost come to a standstill in the coming months, with the inflation that has been a persistent problem for the Russian economy giving way to deflation. The annual inflation rate in Russia already exceeded 10 percent in February, marking the first time it was described as “galloping”.
According to the Bank of Russia’s forecast at the end of last year, the Russian economy is expected to reach the peak of inflation in April or May. However, Izvestia reports that the price growth has already slowed significantly, with the consumer price index showing a 0.11 percent increase in the week of March 4-10 and a 0.06 percent increase in the week of March 11-17.
Experts point out that the strong deceleration of inflation is partly due to a base effect, as the current year’s figures are compared to the same period last year. However, if a seasonally adjusted projection of the current weekly numbers is taken, the price growth is already below 6 percent, a significant slowdown and there are reasons to believe this is not the end.
One of the reasons for the strong inflation was a severe labor shortage until 2025 and today this problem is largely solved, the market is gradually filling up with the required workforce. The popular recruitment portal Headhunter reported 5.1 job applicants per open position in Russia in February, compared to 3.1 in the summer of 2024, Izvestia writes.
The indicators 4 to 8 show that the labor market is balanced, with neither a deficit nor an excessive competition for jobs, the newspaper adds.
The lack of competition for labor leads to a slowdown in wage growth and a lower inflation, experts say. Another reason why deflation might replace inflation is the overstocking on the markets, in various segments, as well as the tightening of the central bank’s credit policy and the strengthening of the ruble exchange rate. Izvestia summarizes: “This is a very strong mix that will strongly influence the price decrease. It is not ruled out that a deflation will be observed in one of the spring months. The flip side of this is a drastic slowdown in the economy, which is already evident in the numbers of business activity. This combination suggests that the central bank will start to lower the interest rate as of April and rapidly.