Improved profitability of Russian firms early this year gave support to paying down foreign debt

BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/40

Even entering recession, corporate sector profits relative to GDP in the early months of this year soared to their highest level since 2008. As has been the case with the amount of profits in the economy, the growth in profits also centred on core export branches, i.e. production of oil and petroleum products, as well as metal industries. Their profits were enhanced above all by the ruble’s sharp drop last winter. Wholesaler profits also climbed after two fairly weak years. Profits in the corporate sector overall returned to normal levels this summer.

The rise in profits early this year has supported investment in oil production, while investment in other branches has gone down from 2014. The special profit situation has meant companies have been able to pay down their foreign debt without relying very much on new borrowing from domestic banks. In addition to paying off their debts abroad, the corporate sector this year has also continued to ship capital abroad e.g. in the form of direct investment.

Corporate profits in Russia
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Source: Finance ministry.

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