Russia's economy under pressure: companies report dramatic declines!

Russia's economy under pressure: companies report dramatic declines!

Russia's economy is under enormous pressure, which has increased in recent months. Although it withstood Western sanctions during the first two years of the Ukraine war, current economic data shows that the situation is clearly tense. In particular, 34 percent of companies report a deterioration in their business situation in the last half of the year, a significant increase compared to 24 percent in December 2022 and 16 percent in May 2024, as Mercury reported. These figures underscore the challenges facing the Russian economy.

The decline in the economy also has structural causes. Key industries such as mining, heavy industry, chemicals and transport are particularly affected. These sectors are seeing the largest declines in sales. In addition, a survey by Yakov & Partners found that 25 percent of companies have changed their investment projects by either stopping or slowing them down. 13 percent are suspending non-essential projects, further illustrating the worrying situation.

High interest rates and a shortage of skilled workers

A central factor in the difficulties facing Russian companies is the central bank's high key interest rate, which 42 percent of company representatives see as the biggest hurdle. This is an increase of four percentage points compared to the previous year. Economic uncertainty is also exacerbated by the shortage of skilled workers, with 48 percent of respondents finding this development a major concern. Business guide adds that concerns about geopolitical risks have fallen sharply, perhaps indicating that companies are trying to adapt to the new realities.

Although the outlook seems bleak, there are also bright spots. Around 90 percent of those surveyed expect their economic conditions to stabilize or even improve by the end of the year. Sectors such as IT, retail, healthcare and consumer goods benefit from more optimistic sentiment.

Pitfalls and opportunities in difficult times

The economic conditions for Russia have improved dramatically in recent years. The ruble has lost purchasing power and the inflation rate is estimated to be around 10.2 percent in 2025. Economic check highlights that access to Western capital markets and technologies remains limited, affecting industrial production. Around 1,000 Western companies have turned their backs on Russia, and exports to the EU have collapsed by over 85 percent.

The Russian government has responded to these challenges by attempting to maintain control over the economy and developing a model that incorporates elements of a war economy. However, this has significant social and economic impacts from which society will take a long time to recover.

A long-term economic outlook remains questionable. It will be important to monitor companies' ability to adapt and innovate, especially with regard to dependence on resource exports. The majority of companies find themselves in a dilemma between the demands of the market and the imposed restrictions.