Russian economy meltdown as firms face mass bankruptcies and consumer borrowing costs soar

Nearly one in four Russian small businesses are on the “brink of collapse”, according to the former head of ‘s National Bank.

Late last year, ‘s Central Bank hiked to a record high of 21%.

The head of the bank, , was forced into the move, as she attempts to curb runaway inflation.

Further hikes have not been ruled out, with some experts predicting a rate of 22% by the end of the first quarter.

Hit by a triple whammy of soaring loans, plummeting sales and evaporating state support, many small to medium sized companies (SMEs) are teetering on the verge of disaster.

The Small Business Index has sunk to a two-year low, and 35% of SMEs expect even tougher days ahead.

In a post to his X social media account, Kyrylo Shevchenko wrote: “Nearly 1 in 4 Russian small businesses is on the brink of collapse.

“As sanctions tighten the grip, consumer spending free-falls, and banks slash loan approvals, 31% of entrepreneurs now steer clear of borrowing entirely.

“’s small business sector is suffocating under its own weight — and the Kremlin’s chokehold.”

Russian consumers face a further blow to purchasing power as credit card hit new highs.

Increasingly, Russians have turned to applying for new credit cards after having their banks turn down applications for consumer loans.

However, banks have raised credit card to 38.8%, as they try to mitigate their exposure to risk.

Yuri Belikov, Managing Director of the Expert RA rating agency, told the RBC website: “Such a substitution did not reduce credit risks for banks, which is why they significantly revised the risk premium for credit cards.

“As a result, it turned out that the growth of the APR for credit cards outpaced the same growth for regular consumer loans.”

Experts believe that the growth of on credit cards will continue and could rise to a whopping 45% per annum.

Russian consumers have been hit hard in the pocket by rising prices, particularly for food.