Financial Times · Starlink · Russia · Ukraine · Israel · Fortune Technology
That’s despite a series of rate cuts from the central bank
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With economic activity slowing and rates still high, more Russian companies have missed debt payments.
Key facts
- According to data from the central bank this week, GDP contracted 0.5% year over year in the first quarter, far below projections for 1.6% growth, due in part to an increase in the value-added tax
- The Center for Macroeconomic Analysis and Short-Term Forecasting, a state-backed Russian think tank, said in December the country could face a banking crisis by October if loan troubles worsen
- Russian newspaper that nearly 25% of the bond market is now at risk of default as businesses that borrowed at low rates must refinance at much higher ones
- Last June, Russian banks raised red flags on a potential debt crisis as high interest rates weighed on borrowers’ ability to pay off loans
Summary
The Russian economy is now shrinking, and businesses are having more trouble keeping up with debt payments, representing a potentially systemic threat to the country’s bond market. According to data from the central bank this week, GDP contracted 0.5% year over year in the first quarter, far below projections for 1.6% growth, due in part to an increase in the value-added tax the Kremlin imposed to pay for its war on Ukraine. That’s despite a series of rate cuts from the central bank, which has kept borrowing costs relatively high to fight war-related inflation. Russian newspaper that nearly 25% of the bond market is now at risk of default as businesses that borrowed at low rates must refinance at much higher ones.