Crisis in the construction sector: Russia is fighting a wave of bankruptcies among construction companies!

Crisis in the construction sector: Russia is fighting a wave of bankruptcies among construction companies!

There is a threat of a jolt to the construction ramp in Russia: the construction sector is facing a massive crisis. Alexey Krapivin, CEO of construction company NatsProektStroy, makes no secret of the fact that he predicts a wave of bankruptcies in 2025. The background is the high key interest rates of 20 percent that were imposed by the Russian central bank to combat inflation. However, this measure has fatal consequences for construction companies, which suffer from financing difficulties and can hardly afford expensive loans. How fr.de reports, high interest rates pose a threat to investments in promising projects, especially in the capital-intensive infrastructure sector.

The economic situation has deteriorated noticeably in recent years, with economists pointing out the negative consequences of high interest rates as early as 2024. Companies often choose to park their money in high-interest deposit accounts rather than invest in risky construction projects. In this situation, Krapivin feels forced to postpone his own investment programs because profitability is questionable.

Key interest rate and inflation

The Russian central bank is keeping interest rates high to control inflation, which reached alarming levels in June 2025. This development was not surprising; Already in September 2024, the central bank raised the key interest rate from 18 percent to 19 percent, and analysts agreed that a further increase in October is not ruled out. The aim of this strategy is to reduce the inflation rate from 9.1 percent to an acceptable 4 percent by 2026, as ostexperte.de reported.

The price increases are directly related to the transition to a war economy and the associated high military spending. A small ray of hope: On June 2025, the central bank cut the key interest rate by one percentage point - the first reduction since 2022, which gives some companies hope that the situation will soon improve.

Market development and forecasts

The situation in the Russian economy is “extremely heterogeneous,” according to Andrei Gangan, director of the Central Bank’s monetary policy department. While sectors such as iron and steel, oil and gas and civil engineering have experienced a decline, other industries, such as the pharmaceutical industry, are flourishing. Economy Minister Maxim Reshetnikov has already pointed out that Russia is on the verge of a recessionary phase, but calls for an easing of interest rate policy to encourage private investment, as in russia.capital can be read.

Raw material prices and constant income from the oil and gas industry act as a stabilizing factor and prevent national debt from getting out of control, which is expected to be below 14 percent of GDP at the end of 2024. Despite these positive aspects, the slowdown in growth remains a worrying sign, especially for the construction industry, which will face major challenges in the coming period.

Looking into the future, it is to be hoped that the situation in Russia's construction industry will improve and those responsible in politics will recognize the need for a medium-term infrastructure plan. The pressure to ensure economic stability is paramount in these circumstances.