BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/39
Russia has strived to promote domestic food production and import substitution for years. Indeed, the Russian government partly justified its countersanction bans on food imports with the need to support domestic producers. However, a report by Russian researchers released in August found that import bans have not encouraged import substitution, but mainly just reduced imports. The report was compiled by the Analytical Center for the Government, although the Center’s status has since been changed from a state-funded government institution to an autonomous non-profit organization.
The report says that this year production of certain foods such as pork and cheese has increased thanks to earlier investment. In contrast, it notes that import restrictions have had a severely negative impact on competition in the Russian food market. As a result, food prices have risen substantially, while product quality has declined.
Many experts worry that the same difficulties could also hit the markets for other products, as import substitution has emerged recently as one of Russia’s key economic policy goals. Import restrictions have already been imposed on government procurements in several branches. Expansions to e.g. other branches and firms participating in investment projects that receive government financing are now planned.