Next week, the Russian State Duma will consider a government bill to revise the federal budget. The main reason for the urgent action is the huge imbalance between the budget's revenue and expenditure parts.
Points of attention
- Russian State Duma to revise federal budget due to significant revenue-expenditure imbalance exacerbated by the war with Ukraine.
- The budget deficit is projected to increase by 220%, necessitating a rise in tax pressure on businesses to stabilize the economy.
- The government plans to increase personal income tax by 180%, corporate income tax by 110%, and value-added tax by 17%, potentially pushing small and medium-sized businesses towards bankruptcy.
Russia is on the verge of an economic crisis due to the war against Ukraine
The strengthening of negative trends in the Russian economy is a consequence of a significant excess of expenditures over revenues, primarily due to the need to fuel the bloody war machine against Ukraine, the Foreign Intelligence Service emphasized.
According to the report, due to the imbalance, the Russian government is forced to revise the federal budget for 2025 in the direction of increasing its deficit by 220% (from $12 billion to $42 billion). At the same time, the Russian Ministry of Finance declares that the projected GDP growth rate will remain unchanged — at 2.5%, explaining its logic by the expected "increase in non-oil and gas revenues."
In fact, this means an unprecedented increase in tax pressure on business in the history of modern Russia.
To normalize the situation in the economy, the Russian government has planned to increase revenues from personal income tax by 180%, corporate income tax by 110%, and value added tax by 17%. At the same time, up to 30% of small and medium-sized businesses in Russia are already on the verge of bankruptcy. By the end of this year, this figure is expected to increase to 50%.
According to a statement by Russian Finance Minister Anton Siluanov, "the priorities of the Russian budget remain unchanged... all national development goals will be met regardless of external conditions and factors..."
However, the Foreign Intelligence Service noted that the Finance Minister is keeping quiet about the fact that the revenue part of the Russian budget depends on Russian oil exports by more than 30%. In the first quarter of 2025, Urals oil significantly lost value.
Currently, Russian oil purchases at the ports of Primorsk and Novorossiysk are hovering around $47-$49 per barrel, while the budgeted price was $69.7 per barrel. Thus, the annual decline in Russian oil and gas revenues could be as much as 30%, or $30–40 billion, which is effectively equal to Russia's budget deficit for this year.
In the context of manipulating official statistics, the situation is similar with the inflation rate. The Russian government sets the figure at 7.6%, while, according to our estimates, real inflation in Russia already exceeds 20% today.
