RUSSIA Hit by Surge in Corporate Bankruptcies as Sanctions & Interest Rates Damage Russian Companies

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March 20, 2024

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The Russian economy is facing a worrying rise in corporate bankruptcies, with a 60% increase in January and February 2024, according to the Russian newspaper Kommersant. This is a significant concern as Russia’s economy is struggling, and companies are being squeezed by rising inflation, which has driven interest rates from 7.5% to 16%. This has resulted in a huge increase in debt costs and financial pressure on companies. The Supreme Court of Russia has proposed increasing the minimum amount of debt a company must have before it can be forced into bankruptcy, making it more difficult for creditors to take action.

The increase in corporate bankruptcies is partially due to Russia’s move to a wartime economy, where the state is diverting resources to fund the war effort in Ukraine. This has led to a lack of access to markets and funding for companies not involved in the war effort. The Russian government is also trying to support companies that are involved in the war effort by providing direct funding, but this has put pressure on companies that are not supported by the state to fend for themselves.

The combination of rising interest rates, restricted access to markets, and reduced profit margins has led to a surge in corporate bankruptcies. This is having a domino effect, where the failure of one company can lead to the failure of many others, as suppliers and customers are also struggling to make ends meet. The Russian economy is facing significant challenges, and the increase in corporate bankruptcies is a clear indication of the difficulties faced by companies not supported by the state.