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. Last Updated: 07/27/2016

Migrant Law Pushes Up Inflation

MTA woman selling horse meat at the Danilovsky market in southern Moscow.
The annual inflation rate rose in May to the highest in four months, as a new law on foreign workers boosted prices of fruits and vegetables, the State Statistics Service said in a statement Thursday.

The inflation rate jumped to 7.8 percent from 7.6 percent in April, the statement said.

"Consumer prices in April and May showed a significant turnaround, starting to grow more quickly" Vladimir Tikhomirov, chief economist at UralSib Financial in Moscow, said Thursday. "It is increasingly difficult but still possible for the government to reach its target of 8 percent" inflation by the end of this year, he said.

Russia, the world's 10th biggest economy, passed new restrictions this year for foreign employees working in the country's booming retail industry. The government limited the number of trading places given to non-Russians, which boosted food prices and created inflationary pressures, economists said.

Foreign workers could only hold 40 percent of all jobs in the nation's markets beginning Jan. 1 and the blanket ban took effect April 1. The ban on foreign workers was authorized by a government resolution on Dec. 15, after race riots erupted in the northern town of Kondopoga after Chechens killed two Slavic men in a street fight.

The restrictions on foreign workers increased costs for market operators, who passed them on to consumers, Tikhomirov said. "Fruit and vegetable prices contributed to speeding up inflation," he said.

Russia needs migrants to boost its labor force, John Litwack, the World Bank's chief economist in Moscow, said last month.

Annual retail sales growth accelerated to 14.6 percent in May from 13.8 percent in the previous month. The average monthly wage reached 12,744 rubles ($491) in May when it increased by 16.1 percent, according to the State Statistics Service.

"Food prices this summer will play a key role in determining the inflation rate" at the end of this year, Tikhomirov said.