Russia’s Corporate Bankruptcy Surge

While Russia’s economy may appear resilient on the surface despite two years of conflict with Ukraine, the country is witnessing a significant rise in corporate bankruptcies, signaling underlying economic challenges.

Alarming Bankruptcy Trends

Recent data from Russian business daily Kommersant reveals a troubling trend in corporate bankruptcies. In January 2024, 571 companies declared bankruptcy, marking a 57% increase from the previous year. This trend intensified in February, with 771 companies filing for bankruptcy—a staggering 60% surge compared to the same period last year.

Impact of Moratoriums

Russia has implemented two moratoriums on bankruptcy in recent years, initially due to the COVID-19 pandemic in 2020 and later in response to Western sanctions imposed over the invasion of Ukraine in 2022. Although these moratoriums expired in 2021 and late 2022, the aftermath continues to affect the business landscape.

Economic Realities vs. Official Figures

Despite official statistics touting Russia’s GDP growth of 3.6% in 2023, the spike in bankruptcies underscores the challenges faced by companies on the ground. While government spending has bolstered the wartime economy, soaring interest rates—reaching up to 16%—are taking a toll on businesses’ ability to refinance and manage debt.

Macroeconomic Pressures

Apart from sectors directly impacted by the war, such as arms production, many facets of the Russian economy are facing significant headwinds. International trade disruptions, exacerbated by sanctions evasion efforts, coupled with macroeconomic instabilities, are deepening the economic strain.

Future Uncertainties

With tightening Western trade restrictions and the looming presidential election, Russia’s economic outlook remains uncertain. President Vladimir Putin’s promises of lifestyle upgrades for citizens ahead of the election, coupled with proposed tax changes targeting high-income individuals and businesses, may further exacerbate pressures on private companies.

Election Dynamics

As Russia prepares for its presidential election from March 15 to March 17, Putin’s anticipated victory adds another layer of complexity to the economic landscape. The outcome of the election, alongside ongoing economic challenges, will shape Russia’s trajectory in the coming years.