{"id":188346,"date":"2025-11-19T04:47:13","date_gmt":"2025-11-19T04:47:13","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/188346\/"},"modified":"2025-11-19T04:47:13","modified_gmt":"2025-11-19T04:47:13","slug":"russian-companies-face-record-debt-burden-as-high-rates-squeeze-profits-think-tank","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/188346\/","title":{"rendered":"Russian Companies Face Record Debt Burden as High Rates Squeeze Profits \u2013 Think Tank"},"content":{"rendered":"

Russian businesses are under mounting pressure from debt servicing as interest payments consumed a record 39% of pre-tax, pre-interest profits in September, according to estimates<\/a> by\u00a0the Kremlin-linked Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF).<\/p>\n

The share rose 1.5 times in the first nine months of the year and has more than tripled over two years.<\/p>\n

\u201cThe burden from interest payments on corporate income is at an extremely high level,\u201d CMASF said<\/a>.<\/p>\n

Corporate profits are falling while borrowing costs remain elevated. Companies\u2019 aggregate financial result \u2014 total profits minus losses \u2014 was 8.3%<\/a> lower in January-August 2025 than the same period a year earlier, according to state statistics agency Rosstat.<\/p>\n

The share of profitable firms slipped to 70% from 72.2%, profits fell 1% and losses at unprofitable companies jumped 30.2%.<\/p>\n

Corporate liabilities continue to rise. Banks\u2019 credit claims and outstanding corporate bonds reached 99.3 trillion rubles on Oct. 1, up 10.4% year-on-year, Central Bank data show<\/a>.<\/p>\n

As a result, CMASF said profitability in industry has dropped to levels close to the lows seen during the Covid-19 period, while the gap between profit margins and lending rates hit an all-time high.<\/p>\n

The share of borrowers \u2014 companies and individual entrepreneurs \u2014 with overdue bank loans increased<\/a> to 24.1% at the start of October, up from 17.9% at the beginning of the year.<\/p>\n

CMASF described the debt load as a structural problem. It estimated that obligations exceed EBITDA by 5.9 times in construction and by 4.1-4.6 times in wood processing, automotive manufacturing and commercial services.<\/p>\n

The strain is compounded by a sharp economic slowdown. GDP growth eased to 0.6% year-on-year in the third quarter after 1.1%, 1.4% and 4.5% in the previous three quarters, Rosstat reported.<\/p>\n

CMASF said the economy is stagnating, industry is balancing between stagnation and decline and consumer demand is weakening.<\/p>\n

Its leading indicator crossed a critical threshold in July, signaling a high risk of recession within a year, and continued rising in August.<\/p>\n

Former Central Bank deputy chairman Sergei Aleksashenko said the problem is not only the level of interest rates but the prolonged period during which they remain high.<\/p>\n

Companies could rely on reserves accumulated during the previous two years of fast growth, he said, but those buffers are now depleting.<\/p>\n

The Central Bank has been cutting rates since June, but the economy is only beginning to feel the consequences of the previous high rates, he warned.<\/p>\n

CMASF compared<\/a> the economic shocks of 2020, 2022 and 2024-25 and concluded that the current period of persistently high rates is at least as severe for corporate finances as the COVID crisis and the initial shock of wartime sanctions.<\/p>\n

It estimated that companies accounting for 23.7% of revenue are in a \u201cfinancially vulnerable\u201d zone this year, rising to 32.5% next year.<\/p>\n

Sectors facing \u201cacross-the-board deterioration\u201d \u2014 declining profitability, rising arrears, falling revenue \u2014 include extractive industries, textiles, clothing, furniture, machinery and equipment and motor vehicle production.<\/p>\n

High rates are transferring corporate profits to the banking sector, said<\/a> Oleg Vyugin, a former first deputy chairman of the Central Bank.<\/p>\n

But banks, he noted, are also paying out high interest to depositors.<\/p>\n

Banking sector profits are expected to fall to 3-3.5 trillion rubles this year from last year\u2019s record 3.8 trillion, according to Central Bank forecasts<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"Russian businesses are under mounting pressure from debt servicing as interest payments consumed a record 39% of pre-tax,…\n","protected":false},"author":2,"featured_media":188347,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[79,632,179,18,19,17],"class_list":{"0":"post-188346","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-central-bank","10":"tag-economy","11":"tag-eire","12":"tag-ie","13":"tag-ireland"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/115574554277316608","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/188346","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=188346"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/188346\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/188347"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=188346"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=188346"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=188346"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}