This text is an automatic translation from Русский. It was generated by AI and may contain inaccuracies.
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This text is an automatic translation from Русский. It was generated by AI and may contain inaccuracies.
Read original →Why 29% of Russian companies slipped into negative territory: an analysis of corporate losses surging to 7.5 trillion rubles, driven by high Central Bank rates, falling oil prices, and shrinking business margins in 2025.
The aggregate losses of Russian business grew from 4 trillion to 7.5 trillion rubles in 2025, with 29% of companies going into the red. The main reasons are high interest rates (up to 21%), rising costs amid economic slowdown to 1%, and credit contraction. Manufacturing, the extractive sector, and trade were hit hardest, while banks and companies with state defense orders remained in the black.
The surge in aggregate losses across Russian businesses—from 4 trillion rubles in 2023 to 7.5 trillion rubles in 2025—reflects a systemic erosion of margins: costs are rising faster than revenues, while the ability to raise prices is constrained by demand. Credit contraction adds further pressure: in the first quarter of 2025, lending to the economy shrank by roughly 680 billion rubles, and in November, disbursements to legal entities and individual entrepreneurs plunged nearly 29% month-on-month. Over the opening months of the year, the corporate loan portfolio grew by just 1%—effectively stagnant. Limited access to financing prevents companies from scaling and achieving cost efficiencies through volume, intensifying the squeeze on profitability.
Manufacturing proved most vulnerable. Industrial output growth slowed markedly in 2025 compared to 2024, even as firms faced simultaneous increases across key expense categories. High borrowing costs weigh on profits, logistics and imported components have become more expensive, and labor shortages have intensified. According to Rosstat, nominal wages rose by more than 12% in 2025. To attract and retain workers, companies were forced into a wage race, driving up payroll costs. That meant a portion of profits was diverted to personnel expenses, further eroding margins. As a result, even major players posted losses—including KamAZ, T Plus, and DVMP. These are capital-intensive businesses: factories, equipment, railcars, vessels, maintenance, fuel, infrastructure—everything is expensive and demands constant investment. Such costs cannot be cut quickly, even when demand falls. And when credit is dear and revenues decline, profit swiftly turns to loss.
In the extractive sector, energy exports are the main revenue source. In 2025, shipments of crude oil and petroleum products fell by several percentage points, while Russia's overall exports declined roughly 3.7% year-on-year. Prices delivered an additional blow: throughout 2025, Brent crude averaged around $68–72 per barrel, falling to $62–64 by year-end—roughly 15% below the prior year. Russian Urals crude traded at a widening discount to Brent: by late 2025 the discount reached $20–25 per barrel, and at times Urals prices at export terminals dropped to $36–40 per barrel, according to Argus. This further squeezed the hard-currency revenues of Russian oil companies.
At the same time, the ruble appreciated sharply against the dollar in 2025: the exchange rate fell from approximately 113.7 rubles on January 1, 2025, to around 79.0 rubles on January 1, 2026—a strengthening of nearly 30% over the year. This means dollar-denominated exports yielded substantially fewer rubles upon currency conversion. Taken together—reduced volumes, depressed prices, and a strong ruble—this combination erodes the ruble revenues of extractive companies and amplifies their costs under sanctions pressure.
The retail sector faced a different challenge: weakening consumer demand. Inflation in 2025 remained above the Central Bank's 4% target, running at 7–8% year-on-year. Meanwhile, high lending rates encouraged households to shift toward savings: deposit yields exceeded 15% per annum. This led to a slowdown in retail turnover and a compression of trade margins, especially in segments dependent on consumer credit and imports.
Around 45,000 organizations recorded profits totaling 33 trillion rubles. The most resilient proved to be:
Resilience is shown either by financial institutions benefiting from high rates, or by companies with direct budget support or an export niche with high value-added.
In 2025, the Russian economy shifted from accelerated growth to a cooling phase, directly impacting corporate financial results. While Russia's GDP grew 4.3% in 2024, Rosstat data shows growth slowed to approximately 1.0% in 2025.
The key factor was a sharp increase in the cost of borrowed capital. From October 2024 through June 2025, the Central Bank held its key rate at a record 21% per annum. Yet even after cutting it to 16%, the cost of corporate lending remains in double digits.
According to Central Bank data, weighted average rates on loans to non-financial organizations exceeded 17–18% per annum in 2025. For capital-intensive industries, this means financial expenses have risen to levels where business profitability becomes unstable and investment programs economically unfeasible.
Against this backdrop, debt burden has become a systemic problem. Corporate lending volume exceeded 80 trillion rubles by the end of 2025. Under these conditions, even a several percentage point increase in average debt servicing costs translates into hundreds of billions of rubles in additional expenses, forcing businesses to compensate through investment and cost cuts or slip into losses.
Corporate profit tax is one of the key revenue sources for regional budgets. It remains among the main sources of budget revenue. In 2024, collections reached approximately 8 trillion rubles, though the Finance Ministry noted deteriorating dynamics even then due to declining corporate profits and a growing share of loss-making enterprises. From 2025, the tax rate was raised from 20% to 25%, but this doesn't solve the problem of a shrinking tax base. According to Federal Tax Service data, corporate profit tax provided 20.5% of consolidated budget revenues in 2025, or 191.9 billion rubles.
This amplifies interregional differentiation: regions dominated by commodity or large enterprises are particularly sensitive to falling corporate profitability.
An economy heated by fiscal stimulus and defense orders has entered a phase of adaptation to expensive money and sanctions constraints.
If rates continue declining and domestic demand recovers, 2025 will remain the peak of corporate losses. If not, business faces a prolonged period of financial "rehabilitation," where only the largest or most flexible will survive.