December 18, 2014 — Russia’s ongoing economic crisis is affecting many western companies and most are already bracing for bigger blows to their earnings. It is predicted that if the oil prices fail to recover, then Russia’s GDP will be reduced to almost 5% in 2015.
If the Russian economy cannot recover, it would mean bad news for a lot of companies who have a considerable exposure to the Russian market.
Ford is a known automobile manufacturer that had experienced a reduction to 40% in sales on the first 11 months of 2014. Not only that, various carmakers are also experiencing a downgrade in sales up to 12%, says the Association of European Businesses. In fact, Ford was forced to let go of about 950 jobs from its Russian joint venture last April.
Volkswagen is also experiencing the same issues as Ford.
Russia had also forced 12 McDonald chains due to sanitary violations but experts believe that this is just a government ploy. Right now, the restaurants have since been reopened.
Total, the energy entity from France, was also forced to shelve their plans for a shale venture exploration with Russia. Even Siemens, who also has considerable exposure to the Russian market, had admitted that their sales are suffering due to the fall of the Russian ruble.
Some companies have even decided to discontinue their services in Russia until things get better. Companies like Apple, Ikea, and GM had already suspended their business in Russia.
Adidas, which is one of the biggest retail sellers in Russia, had admitted that the continuous downfall of the Russian ruble is hurting their business. Adidas has about 1100 stores.
Russia’s financial crisis are giving Western banks headaches, especially the European lenders who are greatly exposed in the country. Russia has an outstanding loan of about $155.9 billion from European banks alone. Banks from France have loaned Russia mostly with $47.8 billion while Italy and the US have loaned the country $27.7 billion and $26.1 billion respectively.
It would be very difficult for Russia to come back from all of this and it would take great effort for them to do so.