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A growing number of Russian industrial companies and lobby groups are voicing concerns over high Interest rates, warning that infrastructure development goals could be at risk. The criticism is primarily directed at the Central bank, which is expected to raise its key interest rate to combat Inflation. This move is seen as problematic by industry leaders, who argue that borrowing costs are already exorbitant.
The issue of high Interest rates is seen as critical, with implications for future investment projects and economic growth. Russian billionaire Alexey Mordashov has expressed concerns that the medicine of raising rates to curb Inflation may become more damaging than the disease itself. Businesses are increasingly cautious about financing new projects, opting to hold funds in high-rate deposit accounts instead.
The high rates are particularly impacting sectors such as construction, energy, and steel. The power sector, in particular, is facing challenges in building new plants and upgrading existing ones due to inflated equipment costs and restricted access to technology. If Interest rates remain high, credit costs will make up a significant portion of final electricity prices, hindering industry development.
In addition to large companies, small and medium-sized enterprises (SMEs) are also feeling the strain of high Interest rates. SMEs are expected to face Interest rates of 30% next year, leading to reduced investments and potentially negative effects on economic growth. The sentiment across industries is that the Central bank is to blame for the current economic challenges.
While external factors such as geopolitical tensions and sanctions play a role in the economic situation, many in Russia are placing the blame on the Central bank. The overall consensus is that the high Interest rates are posing significant obstacles to industry development and growth. In a challenging economic environment, companies are calling for support and solutions to address the impact of soaring borrowing costs.
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SOURCE
Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.
