Industry generally coping with key rate hike, subsidized loans could be needed by auto makers - Industry and Trade Ministry
MOSCOW. Jan 18 (Interfax) - Most industries can maintain efficiency and an acceptable level of profitability at the current key rate of the Central Bank of Russia (CBR), given plans to gradually reduce it this year. At the same time, the Russian government is considering the resumption of support measures for backbone enterprises through subsidizing loans to replenish working capital for certain industries, primarily machine building, said First Deputy Industry and Trade Minister Vasily Osmakov.
"We are at a fork in the road, because this is primarily a question of the source [of subsidy financing - IF]. We do not plan to restore the full amount of subsidies and do not plan to do so, because when it happened last year, it was a shock rate hike. Now it has been a gradual [rate increase], so industries have adapted, and, strictly speaking, the key rate of 16% holds a lot of industries: they are able to survive with marginality and efficiency until key rate reduction, which we very much hope will happen in the near future," he told Interfax during Machine Building Day at the Russia International Exhibition and Forum.
As reported, the Bank of Russia decided to raise the key rate by 100 basis points (bps) to 16% per annum on December 15, 2023.
"I can only operate with official data. The Central Bank's official rate forecast for the year is 13.5%, for it to become 13.5%, it means that it should be lowered somewhere in the middle of the year," Osmakov said of the Industry and Trade Ministry's expectations regarding the prospect of lowering the key rate.
"But there are segments that suffer [from a significant rate hike], for example, the auto industry. As a result, the rate hike in the automotive industry leads to higher prices for the consumer," - said the first deputy minister, explaining that the profitability of enterprises suffers when contracts are advanced at one level of the rate, and their performance at another increased rate.
"If we realize that this problem is very acute, we will launch [subsidized loans for machine builders], but for now we are thinking, we are communicating with the Finance Ministry. The final decision has not yet been made," Osmakov said.
The program of preferential lending to backbone industry and trade enterprises to replenish their working capital (government resolution No. 393) was launched in the spring of 2022 following the CBR rate hike to 20%. The program allowed backbone industry and trade enterprises to receive preferential loans from Russian banks for working capital replenishment for up to 12 months at a rate of up to 11% per annum during 2022. One company could raise up to 30 billion rubles.
The cabinet did not extend this program for 2023 due to a significant decrease in the key rate (at that time to 7.5%), which made the terms of soft loans less attractive. Amid a gradual rate increase last year, representatives of some industries, in particular Avtovaz , came forward with a proposal to resume loan subsidies.