Russian economy meltdown as shopping malls face bankruptcy and bond yields surge

Russian shopping malls are facing mass closures as they struggle to cope with tax hikes and rising loan costs.

Businesses across the country have been rocked by the Central Bank’s decision late last year to raise interest rates to a record high of 21%. The move was made in a bid to bring spiraling inflation back under control, which currently hovers at around 9.5%.

One of the sectors hit hardest by the growing economic crisis is retail, with consumers reining in their spending.

With experts predicting a further interest rate hike, the outlook for many shopping centers has started to look extremely bleak. As many as 200 malls have reached a pre-bankruptcy state and could close in 2025, according to the Union of Shopping Centres.

“Now shopping malls have problems closing existing loan agreements, and new loans are completely unavailable to them,” said Oleg Voitsekhovsky, managing director of the Russian Council of Shopping Centres (STC). “This leads to problems with both profitability and the ability to maintain buildings in proper condition and carry out re-conceptualisation.”

To compound matters, shopping centers have been hit with a rising tax burden that has increased significantly in recent years.

“For two years now, shopping centers have had their cadastral value increased, and therefore, their property tax— from two to 10 times,” said Pavel Lyulin, the vice-president of STC. He added that the property tax rate was likely to increase further over the course of this year.

Other industries are also facing the specter of mass bankruptcies as they struggle to make ends meet in the challenging economic climate.

Coal companies, hit by international sanctions and declining exports, have racked up 80 billion rubles (£650 million) in losses.

Credit: Express News