A Wave of Bankruptcies Is Coming to Add to Putin’s Economic Pain

Russia’s $1.6 trillion economy is going to be dealt another blow when a moratorium is lifted on companies filing for bankruptcy. The measure, which was a condition of government pandemic support, helped protect healthy businesses from creditors but left those that won’t survive limping along as zombies. It expires in October.

“It’s like a life-support machine for companies — if there isn’t treatment, they will just die when it’s switched off,” said Yuriy Khalimovsky, a director at Deloitte’s legal service in St. Petersburg. “When the moratorium is lifted there will be a big wave of bankruptcies.”

The surge in corporate failures threatens to compound an already painful year for Russia’s economy, which is heading for its worst slump in more than a decade. President Vladimir Putin, who is trying to encourage citizens to vote next week for constitutional changes that would allow him to extend his rule, ended lockdown measures early to try to stem the financial pain.

Going Under

A third of Russian companies say they are at risk of bankruptcy

Source: Center for Strategic Research

Survey of 2,300 companies conducted at the end of April

About a third of companies said at the end of April that they are at risk of bankruptcy, according to a survey conducted by the Center for Strategic Research in Moscow.

“As soon as the moratorium ends, a domino effect will begin,” said Alexander Sinitsyn, who heads the research center. “Companies will go one after the other.”

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