Page 91 - bne IntelliNews Russia OUTLOOK 2025

off and a sharp slowdown is expected in 2025. At the same time, the crushingly high cost of borrowing has led some to predict a wave of bankruptcies in the New Year. The situation has been made worse by increasingly effective US sanctions on Russian banks; the latest sell-off, that has driven the MOEX index down to under 2,500 for the first time in a year and a half, was fuelled by new sanctions on the state-owned Gazprombank, which is a key player in collecting payments for gas and oil exports to Europe.
According to Chistyukhin, the inverse relationship between the value of stock indices and interest rates worked. The first deputy chairman of the Central Bank explained that the consequence of the high rate is the flow of investors' funds into more profitable instruments, including deposits, which affects the decline in the index.
“We roughly estimate that in the second quarter, about 10% of the total outflow moved from shares to debt instruments and deposits, and in the third quarter – 16%,” Chistyukhin said.
The dividend gap also has also had an impact, according to Chistyukhin. Pre-war Russian business owners were choosing to take money out of their companies and pay generous dividends, but now with bottom lines coming under pressure due to high borrowing costs those dividend payments are drying up. Moreover, a sharp drop in the share price after the date when the securities are traded on the last day with the right to pay dividends has also pushed prices down.
Investors have also become more cautious in assessing the business development of a number of companies: in addition to sanctions restrictions, problems with logistics and change of partners, the impact of the increase in the key rate and the level of indebtedness of organisations have all become concerns.
Nevertheless, those bankruptcies have not yet arrived. Chistyukhin noted that the share of non-performing loans (NLPs) has remained virtually unchanged and amounted to only 4% as of October 1, so while the conditions are tough, they are not catastrophic yet and the companies are coping.
Nabiullina remains upbeat. In a hearing with the Duma this week, she admitted that much of the economic potential had been exhausted. Interest rates were too high and the cost of borrowing was eating into profits. With the unemployment rate at a historically low 2.4%, there is little growth capacity left in an economy that is in effect at full employment. At the same time, with capacity utilisation at over 80% there is little room for supply side growth either. But she went on to say that the NPLs remain low and predicted a breakthrough in inflation soon
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