Business under pressure: key rate of 16% and rising costs

In the spring of 2023, members of the large Russian business community noted that the key event for the economy was a sharp increase in the Central Bank’s key rate to 16%. This hit small and medium-sized businesses: loans became expensive, investment projects became difficult to implement, and company costs increased. It was especially difficult for those whose turnover “increased” based on demand expectations, but at a high rate, even working capital became risky. Export-oriented companies complained about logistical difficulties, high costs, and uncertainty. Many old contracts turned out to be unprofitable, and new ones were almost unavailable. In such conditions, the business community spoke of an outflow of investment, delays in modernization and the threat of layoffs. This became a test for the economy as a whole: against the backdrop of sanctions, external instability and war, a sharp tightening of monetary policy created an additional burden. May 2023 turned out to be the time when businesses began to reconsider their strategies, assess risks and survive in new harsh conditions.