Russian economic growth threatened by inflation
After eight years as president, Putin has passed on to Dmitry Medvedev stewardship of a booming economy. But it could prove to be a poisoned chalice. The country is facing sky-high inflation driven by food prices that threatens to undermine many of the Putin-era successes, the Sankt Petersburg Times reports.
With the state expecting inflation to top 15 percent in May, rising costs are forcing thousands of enterprises to hike prices even as they struggle to keep costs down, journalist Catrina Stewart writes for the newspaper. A recent poll indicates that about 67 percent of Russians now identify inflation as the most urgent issue facing the country today. Meanwhile, Russian officials have shown a deep-rooted disinclination to do anything that would alienate the population and threaten economic expansion. Over the past 18 months, the country has seen a significant increase in money supply; the ruble has depreciated against the euro and the yen, and the government has pursued an aggressive spending program as it seeks to uphold economic growth, which has averaged at more than 7 percent in the last eight years. Faced by the prospect of tougher lending conditions for banks and, in turn, their consumers, the Central Bank responded by printing more rubles a decision that released liquidity into the system to shore up the financial sector but further fueled inflation, the Sankt Petersburg Times writes.
