Russia: drought is slowing economy, hiking prices

By NATALIYA VASILYEVA

MOSCOW

The drought and fires that hit Russia this summer will lower economic growth by at least 0.8 percentage points and are already driving prices for food staples like bread higher, government officials said Tuesday.

A massive heatwave and drought destroyed at least one-fifth of crops and triggered thousands of wildfires, killing more 50 people. It also prompted Russia, a key wheat exporter, to ban any grain exports this year. The move hiked wheat prices on global markets and spurred domestic prices.

Russia's deputy economic development minister Andrei Klepach told Russian news agencies that the impact of the drought could approach 1 percentage point, but GDP growth targets should nevertheless be achieved.

Before the summer, the government forecast economic growth of 4 percent, a conservative target based on low oil prices. Klepach said the indicator hit 3.8 percent by the end of July.

The drought also sparked a jump in consumer prices -- by 0.5 percent in August alone -- to an annual rate of 5.1 percent, Klepach said.

Prices on staple foods such as buckwheat, which Russians eat as a side dish or as porridge, are rising quickly -- official statistics showed they jumped by more than 7 percent in one week alone in mid-August. With a lack of supply, shoppers are rushing to buy up what's left in the stores. As a result, even some big supermarkets in Moscow no longer stock buckwheat.

Bread prices have so far been stable, but the Federal Anti-Monopoly Service warned on Tuesday it expects them to rise by 10 to 15 percent at the end of the month.