A sharp deterioration in macroeconomic forecasts by the Ministry of Economic Development leaves the RF government with a critical choice: sequester spending or launch another wave of tax hikes, experts warn. Downgrading the GDP growth forecast to 0.4% for this year (three times lower than previous expectations), alongside a stronger ruble and oil production falling to a 17-year low (511 million tons), significantly shrinks the country’s tax base.
System Resource and Macroeconomic Risks:
- Violation of the Budget Rule: VTB Chief Economist Rodion Latypov points out that according to the budget rule, the maximum spending of the treasury for next year should be around 43.1 trillion rubles—which is 3 trillion below the plan and 1 trillion less than current year expenditures. Dmitry Polevoy, Investment Director at Astra Asset Management, estimates the spending ceiling at 44.1–44.6 trillion rubles.
- Impossibility of Cost Cutting: Amid prolonged geopolitical and military confrontation, a nominal cutting of the budget is highly unlikely—there have been no such precedents in Russian history.
- Threat to Business: Investment banker Evgeny Kogan notes the inevitability of a widening budget deficit and tighter fiscal pressure on the commercial sector. As a primary measure, officials are already discussing a windfall tax for metallurgical and gold mining companies.
The Bottom Line: The treasury’s attempts to offset falling commodity and manufacturing revenues at the expense of the private sector are leading to systemic economic exhaustion. Due to the VAT increase to 22% and falling profits in 2026, the private sector and small businesses have run out of safety margins, and any new tax levies will inevitably trigger a wave of bankruptcies, cementing long-term stagnation.