Russia’s economy looks resilient after two years of war with Ukraine, but an increasing number of the country’s businesses are struggling.
The number of Russian companies that have gone bankrupt has skyrocketed in the first two months of 2024, the Russian company Kommersant reported on Thursday.
In January, 571 companies in Russia declared bankruptcy — a rise of 57% from 364 a year ago, Kommersant reported, citing data from the federal register for bankruptcy.
In February, 771 filed for bankruptcy, up 60% from 478 a year ago.
Russia has imposed two moratoriums on bankruptcy in recent years. The first came during the COVID-19 pandemic that started in 2020; the second came after the West imposed sanctions on Russia over its invasion of Ukraine in 2022. The moratoriums expired in 2021 and late 2022, respectively.
Ilya Torosov, Russia’s First Deputy Economy Minister, told Kommersant that this is just a return to pre-pandemic levels.
The uptick in corporate bankruptcies highlights the difficulties faced on the ground in Russia. It also stands in contrast to the rosy official statistics the Kremlin releases, which show that Russia’s GDP grew 3.6% in 2023.
Thanks to government spending, Russia’s wartime economy is resilient, but peak interest rates are hurting. The Bank of Russia raised interest rates to 16% to calm the economy and inflation.
“Companies are experiencing refinancing disruptions as the effects of the economic adjustment begin to be felt,” Bartosz Sawicki, a market analyst at Conotoxia, a Polish economic generation company, told Business Insider.
Aside from war-related sectors such as weapons production, the Russian economy “is far from optimistic,” Sawicki said.
“Although Russian corporations are doing everything imaginable to avoid sanctions, foreign industry has become a significant factor for many of them,” Sawicki wrote in an email.
“The sector is also feeling the pressure of macroeconomic instabilities, which are worsening as the economy teeters on the brink of overheating,” he added.
It may just be worse.
Russian President Vladimir Putin’s regime is coming under tightening Western trade restrictions, including secondary sanctions against companies doing business with the country.
Putin has also promised to give Russians billions of dollars for their lifestyle weeks before the country’s presidential election later this month.
While it’s unclear where the extra budget for Putin’s promises will come from, the Russian leader has proposed changes to the tax system that are designed to result in more taxes from high-income individuals and businesses — which could put even more pressure on private companies.
The Russian presidential elections will take place in 3 days, from March 15 to 17. Putin is expected to win the election among 3 opponents.
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