Russian companies on the brink: Inflation chaos leads to bankruptcies!

The Russian economy is facing a serious crisis, marked by an impending wave of corporate bankruptcies. This is compounded by the shift to a war economy and persistently high inflation. These factors are forcing the Russian central bank to raise the key interest rate to 21 percent, which is the highest level since 2003. Experts fear that the key interest rate could rise to 25 to 30 percent next year.

The situation is particularly worrying for manufacturing companies. Over 20 percent of them reported interest costs at the end of 2024, which accounted for more than two thirds of their pre-tax profit (EBIT). In addition, lending to key industries collapsed by 30 to 50 percent in November and December 2024, leading to a credit crunch and refinancing difficulties for highly indebted borrowers. Between July and September 2024, large and medium-sized businesses experienced a 19 percent delinquency rate, while small businesses experienced a 25 percent delinquency rate.

Are there a risk of bankruptcies in several sectors?

The situation is further aggravated by criticism from entrepreneurs such as Igor Sechin, head of Rosneft, and Sergei Chemezov, who point out the negative impact of high interest rates on financing costs, as well as from entrepreneurs who speak of a general depression in the economy. The food sector has been particularly hard hit, where prices for butter have risen by 24 percent and for potatoes by 55 percent. Around 200 shopping centers are facing bankruptcy due to unaffordable loans.

Further challenges arise from Western sanctions, which severely restrict access to important components for the defense industry. In addition, the coal industry is suffering from falling demand, especially from China, which significantly reduced its orders in 2024. Dmitry Alexeyev, founder of the DNS retail chain, describes the current situation as desperate, as entrepreneurs are increasingly speaking publicly about payment defaults and impending bankruptcies.

The economic problems are compounded not only by the central bank's interest rate policy under Elvira Nabiullina, which has been criticized as dangerous, but also by skyrocketing government spending and Russia's general isolation from international markets. The International Monetary Fund has cut its growth forecast for 2025 to 1.3 percent, increasing uncertainty and the risk of further bankruptcies.