SEVASTOPOL, December 12. /TASS/. Banks are coping with the situation, which has developed after a sharp raise of Bank of Russia’s key rate, better than enterprises, which have to take out loans to ensure their operation, Alexander Murychev, executive vice-president of the Russian Union of Industrialists and Entrepreneurs (RSPP) and Deputy Chairman of the Board of the Association of Russian Banks said on Thursday.

On October 25, the Bank of Russia sharply increased the key rate by 2 percentage points, after which it reached a record high of 21% per annum. The regulator also raised the forecast for the average key rate for the period 2024-2026.

"Referring to business assessments, we take measurements almost quarterly, and I would like to say that the situation is quite alarming. <...> It is connected with very expensive borrowings - the Central Bank carries out its part of the functions on monetary policy in accordance with the law: it fights inflation, raises the key rate, which is already 21%. <...> All this cannot but affect the situation in the real sector of the economy, the banking sector. <...> So far, the general situation [in the banking sector] has not changed much, but the situation for industrial enterprises is much more difficult," Murychev said during the Career Development Day at Sevastopol State University.

He noted that the banking sector is actively developing.

"Profits are growing, loan portfolios are growing, capital is growing. This indicates that the banking sector is quite stable, it performs its functions," the expert said.

Meanwhile, industrial enterprises continue to borrow from banks.

"They need to ensure current operations, pay wages, make payments, including taxes, and so on. So, they are forced to take out loans and use their resources," Murychev said.

Slower economic growth

According to him, bank profits are expected to be slightly below 2023 (earlier, the Bank of Russia reported that the national banking sector could earn 3.5-3.8 trillion rubles ($33-36 bln)) in net profit by the end of 2024). According to the RSPP, the profits of industrial enterprises in total are estimated at more than 40 trillion rubles ($385 bln) (earlier, Russian Finance Minister Anton Siluanov reported that the total profits of companies in 2024 would grow to 53 trillion rubles ($510 bln)). Meanwhile, the situation of industrial enterprises is more unstable - they are even afraid to invest in their development.

"We hope that the Central Bank is taking the right steps. As an economist, I understand, but industrialists are unhappy <...> By 2025, judging by all forecasts, even according to the Central Bank, our GDP may grow to 1.5%, while the Economic Development Ministry expect it to be 1.5-2%. Whether this will be achieved - there are big doubts, rather, the Central Bank is right that 1.5% is the maximum that can be achieved," Murychev explained.

He also recalled that now Russian industry can only count on resources within the country, because ties with Western countries have already been severed, and with Asian countries have not yet been established to the required extent.

Earlier, the Industry and Trade Ministry stated that additional support for the investment activity of industrial enterprises will be required in the near future to maintain production growth rates in the short-term and medium-term.