The collapse of the ruble, Prices will soar after the dollar


Обвал рубля: Цены взлетят вслед за долларом

The ruble exchange rate after the introduction of new US sanctions continues to fall for a third consecutive day. Although most experts called the drop the result of emotions on the stock exchange and speculated that the ruble soon will partly play their positions, until this moment has not come. On the contrary, on 11 April the national currency has breached the psychological mark of 65 rubles to the dollar to 80 rubles per Euro. News that the US is preparing to impose sanctions on Russian government debt and state-owned banks, as well as promises of US President Donald trump to start bombing Syria do not add optimism to participants of the financial market. The official rate of the Central Bank on Thursday 12 April was 64,06 rubles per dollar (+1,69 rubles) and 79,28 rubles per Euro (+2,43 rubles).

Unlike economists and stock market analysts retailers did not wait for recovery of the ruble and have begun to announce upcoming price increases. First it was declared by the sellers of household appliances and electronics. In “Candy Hoover Group Russia”, which owns the plant “Vesta” and is engaged in the sale of household appliances, did not rule out raising prices by 10-15% from next week.

“We have already sent out a warning that, if exchange rates do not return to the level of last week, from next week, we will be forced to raise the prices of shipments of our products,” — told “Kommersant” Gleb Mishin, General Director of the Russian representation of the company.

Network “M. Video” also reported that a number of manufacturers announced plans to increase procurement prices by 5-10%, although he promised “to do everything possible to save the current retail prices”. The revision of prices reporters also said representatives of “Eldorado” and “Olmert”. In MTS and “the Messenger” reported that the prices remain the same and “not likely to change in a few months”, but in the context certain comments refused to give.

Demand of Russians for home appliances started to increase shortly after the announcement of new sanctions, but even before the market opens. Apparently having learned from past experience, the citizens foresaw the fall of the national currency. The President of the Association of companies the Internet-trade (AKIT) Alexei Fedorov said that the amounts of clicks on websites on Saturday-Monday increased by 15%, and the period of selection of goods decreased from two or three to one week. According to Fyodorov, the technique will change in the best case, a month and a half if the course will not change, and the small retailers will raise them above the major retailers.

Later, the sellers of household appliances and electronics, joined by the retailers of clothing, shoes and accessories that warned of a possible increase in prices. It is expected that the current fall of the ruble price increase will occur in the autumn and will affect winter collections. Co-owner of a Shoe network “Ekonika” Sergey Sarkisov and CEO of “Obuv Rossii” Anton Titov said that the price revision shoes possible in the case that the ruble will fall by more than 10%.

Of course, the weakening of the ruble will affect, or rather, already touched on outbound tourism. Press Secretary of the Russian Union of travel industry (PCT) Irina Turina said that sales of the foreign tours on the backdrop of a rapidly weakening of the ruble slipped by 30-40%. As a small positive she did not rule out that now such countries as Greece and Turkey will reduce the cost of accommodation for the Russians to attract them to their resorts.

Some retailers try to reassure consumers, Recalling that after the fall of the course in 2014-2015 prices on electronics jumped not once. However, the Deputy Director of the Institute of contemporary economy Ivan Antropov believes that the sellers will not to repeat past mistakes and wait for the ruble will grow, but instead will raise prices in the coming weeks. In addition, rising prices will affect not only electronics and clothes, but almost all groups of goods up to food.

— Compared to a sharp jump in the exchange rate of the end of 2014 or beginning of 2015 retailers will no longer delay the price increase in the hope that the course will recover and will act bolder and faster. Last time everyone was hoping that the ruble falls and prices will return to normal, but this did not happen. Faith sellers in a positive development today is minimal. Therefore, the price increase is very likely in the near future, and for a wide range of products.

“SP”: — what is it?

— The most obvious is electronics and appliances, which depends on imports. Even domestic production of these goods based on imported components. Also the rise in prices for food products. This is due to the fact that farmers are often forced to buy expensive imported fertilizers and seeds. Domestic breeding is not in the best shape and no import can not do. Therefore, the price increases will affect many food products.

We can say that more expensive is almost all groups of goods, since import substitution in the last three years does not work. On the contrary, our dependence on imports has only increased. Ranepa in February 2018 published a study which revealed that if three years ago imported technologies and raw materials were ready to give up about a third of businesses, today companies such only 7%. Clothing, household chemicals, and medications all depend on import.

Even the simplest of medicines for which prices are regulated by the state, dependent on imported raw materials. Already had a situation a few years ago, when many pharmaceutical enterprises have refused to manufacture the simplest of cheaper drugs due to the fact that the state regulation of prices made them unprofitable. This experience is taken into account, and the prices of basic medicines will grow like everything else.

“SP”: — How much will prices grow?

— This will depend on the dynamics of the currency. The Euro had risen more than 10%. Only in this way, the retailers can raise prices up to 15%. They will try to mitigate this increase, so the first wave will be on 7-8%, and after a while the same again to for consumers it was not a shock. Then everything will depend on the exchange rate, the market will look again whether the sharp jump in 2014-2015 or not.

“SP”: — But economists and stock analysts say that when the panic dies down, the ruble is likely to return to a level of 60 per dollar. If this happens, prices will go down?

— Rollback of the currency, which analysts say, is quite possible, but the prices in stores it would have no impact because it will not change the trend of weakening of the ruble, but merely a short-term phenomenon. Likely to continue further decline of the ruble. A lot will depend on how to behave in exchange, as will happen with the sanctions in Syria. If the dollar is fixed at 64 rubles to the dollar, it could open the way to increase to 70 rubles per dollar. So to lower prices in the shops to count especially not worth it.

“SP”: — When exactly should you wait for higher prices, yet now retailers are selling already purchased the goods?

Retailers are determined, and a matter of days. With the jump past when the price increase was postponed, their financial performance is greatly subsided. Again this situation no one wants. Especially because now all already not the best position due to the low purchasing power of the population. I repeat that the price increase is very likely in the near future.

“SP”: — But won’t that reduce the purchasing power of the population even more?

— Continue a marketing move, like discounts and promotions, it may even increase its popularity. But it will catch up final selling prices. Purchasing power and higher prices, of course, bad along. But many retailers will be to focus on the fact that the last three years and so there has been stagnation and reduction of consumption of goods for personal use. This means that for many people they become obsolete, wear out and require replacement. Nowhere to go, they have to be purchased at a higher price. Perhaps with the help of loans that now, if the Central Bank changes its policy, should be a little more affordable. So the increase in prices will be compensated for the market promotion of credit programs.

The same unfavorable opinion of the senior researcher of the Institute of applied economic research Ranhigs, member of the Expert Council for competition development under the government of the Russian Federation Vadim Novikov.

— Apparently, prices will rise. The current fall of the ruble is already a certainty, but future growth remains hypothetical. Especially if this growth occurs, it will not commensurate with the fall. We already have experience of such crises, and each time they lead to a decline in living standards of the population.

Ultimately, the fall of the ruble will lead to higher prices not only on imported and domestic goods just because there is competition between them, and when prices rise from foreign manufacturers, they rise and domestic companies. Current events are very unpleasant for Russian consumers, who will have to reconsider their plans to buy expensive imported goods, and plans for summer vacation.

“SP”: — why retailers are willing to raise prices now, because they bought the products before the fall of the ruble?

Retailers react not only to events that have already occurred, but also what will happen to their future. Money from sales that they will get today, it should suffice for the purchase of the same goods tomorrow. And these purchases are obviously at a different price.

“SP”: — What commodities will rise in price the most?

The increase will affect almost all product groups, but to different degrees. More than any commodity group import, the more prices will go up, including for domestic products. Relatively speaking, you can divide the goods into three groups. The first is the imports, which will rise the most. The second domestic goods that compete with these imports, and the third the rest of the products that the price increase will affect to a lesser degree.


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