Wage arrears in Russia surged by 43.5% in 2024, as companies struggle to pay their workers in the difficult business environment.
Russian firms were stunned when the Central Bank suddenly raised interest rates to a record high of 21% last autumn.
The hike in rates was initiated by spiralling inflation, which officially hovers around 9.5%.
Bank officials have not ruled out another rise in the first quarter of 2025, with some analysts predicting a new rate of 22%.
Companies with a large debt exposure are facing an uphill battle to repay their loans, as they fight to stay afloat.
New data shows that workers are increasingly facing long delays in getting paid, a sign of the growing difficulties firms face.
As of January 1, 2025, Russian companies’ debt to their employees totalled an eye-watering £4.2 million, an increase of 43.5% year over year.
More than £900,000 is accumulated debt from 2022 – 2023, with the remaining amount made up of salaries that were not paid in 2024.
Rostat, the Russian statistics agency, said wage arrears had increased for the first time in nine years.
In 2015, business debts to workers exploded by 75% to £29 million after the imposition of sanctions and the collapse of oil prices in the wake of Putin’s decision to annex Crimea and provoke an uprising in eastern Ukraine.
Workers in the construction industry have been the worst affected, accounting for half of the wage arrears.
A steep decline in new mortgage approvals and high interest rates have hit the building sector.
Another 20% of arrears are concentrated in the manufacturing industry, where firms struggle to access credit.
In another blow for Putin, business profits plunged by 17% between January and October last year, with firms losing £41 billion in monetary terms.
Every fifth manufacturing firm is having trouble repaying its debts due to the high interest rate.
Experts from the Centre for Macroeconomic Analysis and Short-Term Forecasting warned that the economy “faces the threat of a large-scale jump in corporate bankruptcies.”
