Manufacturing Industry Losing Financial Stability

According to M. Yurin, Deputy Head of the Ministry of Industry and Trade, the financial cushion of industrial enterprises continues to thin as their financial resources shrink. This is driven by the narrowing ability of Russian enterprises to rely on self-financing as the primary source of long-term investment (which accounts for over 50% of total resources allocated for these purposes). An increasing share of enterprise funds is being diverted to a priority need—covering the growing deficit in working capital. Imbalances in the ratio of enterprise liabilities to assets are intensifying.

Meanwhile, Russian enterprises' access to resources in the domestic market is constrained by the low level of economy monetization, measured by the M2 monetary aggregate (around 50% compared to, for example, over 200% in China), as well as persistently high interest rates (the Central Bank of Russia's key rate stands at 16.5% compared to, for instance, the People's Bank of China's base rate of 3%). Alternative borrowing opportunities in foreign markets are blocked by sanctions.

Under current conditions, factors supporting the financial stability of Russia's manufacturing sectors include the consolidation and synergy of budget funds, bank resources, and enterprise capital to facilitate investment and replenish the working capital of economic actors, alongside the overdue transition by the Central Bank of Russia from a neutral to a proactive monetary policy under the new circumstances.