Associate Professor of the Department of State and Municipal Finance of the Russian Economic University. GV Plekhanova Maria Dolgova explained in an interview with the Prime agency why we should worry and be careful about price cuts. We are talking about the so-called deflation, which is a negative symptom of the state of the economy.
Dolgova believes that reducing prices only seems like a good thing, but in reality it is not. If for the population this is a sign that they can buy more, then “for producers of goods and services (both private and public): negative”.
And even worse is the so-called “deflationary spiral”, when purchasing activity falls, that is, the profitability of manufacturers decreases, and the next step will be to lay off staff and cut salaries. Then demand will fall further, as will prices. Additionally, pent-up demand arises when people postpone purchases, waiting for prices to fall. After this, the entire financial sector, as they say, “collapse”.
