How inflation affects belarusians' fridges

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How inflation affects belarusians' fridges

The rise in prices in Belarus breaks records of the past ten years. However, TV media reassures us that the situation in the neighbouring countries is even worse. They claim that Western countries are on the verge of starvation and even envy the food prices in Belarus and Russia. We walked into grocery stores in Belarus, Russia, Lithuania, Ukraine and Poland and to verify this statement. It turned out that only one country can really be jealous. 

According to official statistics, an average Belarusian household spends a little over 500 roubles on food. A year ago it accounted for 462 rubles. That means that our expenses have only increased by 40 rubles. That's the official data. According to unofficial data, the increase is much more significant.

Anna Ivanovna is 60 years old, her whole life she worked as a preschool teacher and retired two years ago. Now she lives on 600 roubles a month and says she can't even buy some sausage.

Anna Ivanovna, retiree: "How can a pensioner buy a piece of pork? I don’t know how one can afford it. How can you afford good fish? Of course, you can buy fruit - apples, for example. Cabbage will cost 4 roubles in a while - yes, it's fresh, from Kazakhstan. But the price of potato has dropped a little bit. You buy a few potatoes, onions, carrots - and that’s it, 10 rubles. Can you afford a good sausage? I haven't bought it for a long time, it isn’t even worth this price. The whole situation is unbelievable."

Prices have risen by 18% this year. They are also growing in other countries. In Estonia and Russia, for example, inflation is even higher - about 20%. The Belarusian state media claim that Poles and Lithuanians are coming to Belarus for cheap food. To find out where it's actually cheaper to buy groceries, we ran an experiment. Our correspondents went to shops and bought the same set of products in Belarus and in the neighbouring countries - Lithuania, Ukraine, Russia, and Poland.

Purchasing in Poland: "We take rye-wheat bread, sliced, 500 grams, it costs 2 zloty 99 groszy ($0.63). 3,2 % milk in a plastic bottle, one litre, costs 3 zloty 9 groszy ($0.65). All apples here cost 3 zloty 29 groszy ($0.69) and we'll get them too. Regular tomatoes cost 5 zloty 45 groszy ($1.15). Of the meat, we took a pork shoulder, 1 kg, which cost us 16 zloty 25 groszy ($3.43)." 

In Belarus, as it turned out, pork is more expensive, and tomatoes, on the contrary, are cheaper than in Poland.

Purchasing in Belarus: "Almost a kilo of tomatoes. The price is 69 kopecks ($0.27). A pork shoulder, also a kilo. Well, you can see the price here: 12.35 ($4.89). Next, new potatoes. Also almost a kilo. The potatoes are 86 kopecks ($0.34). Chocolate "Milka", an 85-gram chocolate bar, it’s 3.99 ($1.58)."

Salt, sugar, bananas and young potato cost the same in Poland and Belarus. Eggs and flour are cheaper in Belarus, but milk and, surprisingly, still water is cheaper in Poland. Water is even twice cheaper. You can go to Ukraine for butter, bread, flour and eggs.

Purchasing in Ukraine: "Moving on. Now we need a dozen eggs, category C1, chicken eggs are fine ($0.93). Gouda cheese, 150 grams, sliced, on sale is 45.90 ($1.24). A kilo of flour costs us 17.40 ($0.47). And a litre of sunflower oil is 65.10 ($1.76)."

In Lithuania, eggs, butter, flour and milk are more expensive, but sugar, spaghetti, coffee and apples are cheaper, and a bar of Milka chocolate is even twice as cheap although it weighs 100 grams in Lithuania and 85 grams in Russia and Belarus. Pork is slightly cheaper. But to Russia you can only go for bananas and butter. Everything else is more expensive there. 

This is what we got. We have marked the best food prices in yellow and the highest food prices in pink. This makes it easier to see levels of prices in different countries.

Russians will pay the most for a basket of basic products - almost $55. This country has proved to be a leader in terms of cost. Cheese, milk and meat are twice as expensive as their Polish counterparts. 

Somewhere close go Belarus, Ukraine and Lithuania. Each has something more expensive, something cheaper, but a basket full of groceries here costs $38-40. 

In Poland, many products were cheaper. They cost us $33.6 in total. This is 40% cheaper than in Russia and 18% cheaper than in Belarus. 

When calculating prices, average salaries in the countries should be taken into account. We took average salaries in Belarus, Poland, Russia, Ukraine and Lithuania, compared them to the cost of the food basket to see how many times a fridge can be filled on a month's salary. And this is what we got. In Belarus, on the average netto salary an employee can buy 13 sets, while in Poland and Lithuania - 28. In Russia, one can buy 17 sets; in Ukraine - only 7. Only Ukraine is lower than Belarus in this regard. And only Russians are interested in coming to us for shopping. This is confirmed by Dzmitry Kruk, economist and researcher at BEROC:

"If prices rise in Russia and the corresponding goods are produced in Belarus at a lower cost, it’s profitable for exporters to supply them to Russia rather than to the Belarusian market. This is an absolutely natural mechanism for price equalisation within the Common Economic Space. In principle, this is what we are seeing now. Food prices have risen all over the world, but in Russia this shock is felt to a much greater extent than in our country."

The second reason is that there is a lot of excess money in circulation, and this accelerates inflation. Uladzimir Kavalkin, head of the Kosht Urada project, told us: 

"There is a money printing process going on right now, there is a large excess of ruble liquidity in Belarusian banks at the moment. You can see it very clearly in the deposit auction, when banks don't know where to put the currency they have."

And the third reason is that import is getting more expensive. It would seem that we grow our own food on our land and are not affected by imports. But this is not the case. 

Uladzimir Kavalkin, head of the Kosht Urada project: 

"For example, to produce a tractor or a MAZ bus or, I don't know, to raise a chicken, you have to import a lot of stuff - from metals, oil and gas to compound feed, food additives, antibiotics for livestock and poultry..."

According to state statistics, it’s agricultural products that are pushing prices up in our country the most. The price of agricultural products has risen by a quarter over the year. The prices for potatoes and wheat rose the most - by one and a half times, milk - by a quarter. The agrolive.by expert believes that poor harvests play a role here:

"Yes, there have been more cases like that. And it's not that they are all connected with criminal intentions. Many managers of agricultural enterprises take such steps out of desperation, hoping to earn some money, to get out while they still can. I think a lot of people have a feeling that it's going to get even worse." 

On the other hand, our interviewees do not deny the possibility that they are looking for someone to blame. After all, the system problems that have piled up over the years in agriculture are becoming more and more tangible. There may have been abuse of power. But these are only symptoms. Dzmitry Kruk, economist and researcher at the BEROC centre, told us:

"Ever since the late 1990s, we have had what economists sometimes call “scissors crisis”: in agriculture, costs were understated so that prices would also be low. This gave an advantage to food producers: by buying inexpensive local products - raw milk, meat - they could process them into sour cream, cheese or sausages. Price competition is getting stronger, especially on the Russian market. And we can say that the cream that is skimmed off by food exports, part of this cream in the form of subsidies and grants then goes to agriculture. That is, if an industry is subsidised and if you realise that you can play with these financial flows into your own hands, it creates a very good basis for abuse. One can say that you have created this basis with your own hands".

Lately, Alyaksandr Lukashenka has been repeatedly saying that hunger is coming. He reassures Belarusians that, unlike the EU, they will have something to eat. And experts agree that we have a high level of supply of milk, meat, sugar, chicken eggs. Belarus is ranked 36th in the Global Food Security Index. Not a bad index, but worse than that of Russia and many European neighbours. And there may still be a shortage of some products. The agrolive.by expert believes that problems may come in all spheres:

"Problems may arise in absolutely all spheres, but those segments where food security is questionable will be particularly vulnerable, for example, horticultural products." 

This year Belarusian farmers harvested less vegetables. The yield there fell from 61 c/ha to 50. But the grain yield went up: 10 million tons were threshed. However, even this is not enough for Belarus, agrolive.by expert believes: 

"After all, even with a thresh of 10 million tons (excluding corn), Belarus is already starting to experience a shortage of feed grain by the New Year. Many poultry and pig farms are the reason. Grain has been in short supply since winter, which was indirectly confirmed by Lukashenka when he let it slip that he had asked Putin for additional supplies".

This year the Council of Ministers has imposed a ban on import of goods from "unfriendly countries" which have supported sanctions against Belarus. It’s forbidden to import meat, dairy products, vegetables, fruits, nuts, confectionery and salt. But this list has already been revised three times. In spring, the government reconsidered and removed apples, pears, eggplants, sweet peppers, lettuce and herbs from the list. In summer they "recovered" berries and fruit. Since September Belarusians have been able to buy celery and kiwi again. Dzmitry Kruk does not rule out the possibility that everything that got there will be gradually removed from the embargo:

"You can beat yourself on the chest saying that imports is the main enemy. Even if it’s just consumer imports, they’re very important because they’re in demand. If it wasn't in demand, it wouldn't be coming into the country. So it is better either in quality or in price. But most likely it has an optimal price/quality ratio. And if households are getting poorer as real income declines, and their consumer choice is still narrowing, they are forced to buy worse products at a higher price, and this will cause more and more dissatisfaction. And the assortment problem: we can see from household surveys that the problem of narrowing consumer choice is also one of the key ones.” 

What will happen to prices next?

Prime Minister Raman Halouchanka had already reassured everyone by saying that there was no reason for further inflation. We will save on packaging, improve work organisation, save energy resources and launch ergonomic equipment. That is what the Vitebsk officials’ are going to do to fight the rise in prices. And it’s possible that Halouchanka may be right. After all, the global prices affecting the Belarusian ones have already stabilised. 

Dzmitry Kruk: "We can see a certain stabilisation over the last few months, and even a decline in the price of some foodstuffs. If there is no new influence of the war in Ukraine on the dynamics of food prices, increase of this negative influence... If the National Bank does not take any measures to accelerate inflation - this, by the way, is also happening - then, apparently, prices could stabilise".

However, he predicts this stabilisation not sooner than six months from now. In the meantime, Belarus has to adapt to the new conditions, to the economic shocks that have already occurred. This means further price rises. The economist explains that there is still a significant price difference between Russia and Belarus. Our experiment has also proved it. And prices will keep rising until inflation is reduced. Dzmitry says that we should look at the price ratio with Russia:

"I would urge you to look at the price ratio with Russia within this issue. And so far there are gaps in the price level, especially for food products; they are quite significant. The Russian price level exceeded the Belarusian one by 25% and, in some positions, to twice as much, i.e. up to 200%. Accordingly, this potential is still there."

Economist Uladzimir Kavalkin reminds us of another reason for the price rise: "It seems that prices are going to rise. I’m judging by how the ruble is growing. The National Bank is increasing it, and the government is increasing it in different ways. This is not a direct money print, this is mainly the issue of development bank bonds to renegotiate loans, to inject money into state enterprises and so on. This is one of the important sources of inflation at the moment." 

In six mounts’ time, we will run our experiment again to see the changes in prices on food in Belarus and neighboring countries and will also verify our experts' predictions.