Russian President Vladimir Putin is a man with a plan. At the annual meeting of the Council for Strategic Development and National Projects on December 9 he updated the goals for 2026 and promised to “clean up" the economy.

Under-acknowledged, Putin has been focused on economic reform since he took office. As bne IntelliNews reported at the time, there are two Putins: the economic one and the political one. As widely reported, the political Putin is authoritarian and tends to poison its critics with radioactive tea and murder its dissidents who are serving long sentences in jail.

The first things the economic Putin did on taking office in 2000 was to completely revise the labour code and introduce the flat tax regime, slashing rates of both income and corporate taxes to stabilise budget revenues. He also began to raise public sector wages by 10% a year for ten years to close the gap between the private and public sector wages or face social unrest. Those reforms kicked off an almost decade long boom that saw Russia’s economy more than double in size.

The economic Putin is much more benign. The economic revival plan has come a long way from the original “Gref Plan” where Putin hired the liberal economists German Gref, now CEO of Sberbank, to slash red tape and end the economic chaos of the Yeltsin-era. That evolved into Plan K in 2016, an economic revitalisation of the economy drawn up by former finance minister and the architect of Russia’s reforms Alexey Kudrin that eventually turned into the National Projects 2.1 programme.

The great irony of the war in Ukraine is that it has forced deep root and branch reforms to improve efficiency and cut corruption. While the elite still help themselves to billions of dollars of public money, at the lower levels of economic activity the Kremlin is demanding – and getting – much greater efficiencies.

Prime Minister and former investment banker, Mikhail Mishustin, was given the job of heading up the tax service, where he implemented a new revolutionary IT system that saw the government’s tax take grow by 20% at a time when the tax burden rose by only 2% (and now by another 2-points when a hike in VAT comes into effect.) At the same time, in a hunt for more military spending revenues, Russian Finance Minister Anton Siluanov has been going through budget spending with a fine-tooth comb to cut as much waste as he can. The Russian team in charge of macroeconomic reform and monetary policy is acknowledged to be one of the best in the world – one of the reasons that sanctions have been so ineffective.

The National Projects is now back in focus as Russia’s economic problems are bad and getting worse as the military Keynesianism boost from the war is exhausted. Putin reviewed the implementation of national development goals and outlined six key policy priorities for 2026. His speech focused on demographic challenges, economic performance, labour productivity, and technological leadership.

After two years of strong growth in 2023 and 2024, Putin said at the annual “Russia Calling” investment conference that growth this year will come in at 0.5%-1% and CBR governor Elvia Nabiullina added this week that Russia is in danger of stagnating if more reforms are not made to boost productivity. The government has promised to “clean up the economy” and get Russia Inc growing again.

Policy priorities:

Putin outlined six key policy priorities for 2026, putting reversing negative demographic trends at the top of the list – a policy that has been top of his agenda since his first day in office. This will involve expanding state support for families and introducing new measures to promote engaged fatherhood, including financial incentives and tax exemptions.

The government will also aim to restore economic growth to levels comparable with the global average. Previously, Putin set a goal of outperforming the global average growth rate, but since the war started that goal has been quietly dropped. Structural changes will target high-value sectors, the creation of modern jobs, and increased domestic consumption as the budget tries to transition away from its oil export dependency towards domestic consumption; VAT revenue already accounts for just under 40% of the tax-take compared to oil’s 25% share.

Another priority is the modernisation of Russia’s foreign trade, with a shift toward the export of high-technology products and away from raw materials. Imports will be focused on more import substitution, goods that cannot be locally substituted, while encouraging domestic production in advanced industries.

Efforts to formalise economic activity will be intensified with a crackdown on the shadow economy, curbing illegal trade practices, and ensuring increased tax compliance, especially in light of the planned VAT rate increase.

An illustration of this optimization is the tax threshold for VAT exemptions for SMEs has been dramatically reduced, drawing criticism that the Kremlin was increasing the burden on small businesses. In reality, the measure is designed to stamp out the practice of “fragmentation” amongst SMEs which were breaking their businesses in several smaller pieces in order to avoid VAT payments. This is only the latest in a raft of tax reforms designed to boost the efficiency of tax collection.

Improving labour productivity remains a key objective, particularly in underperforming sectors such as trade, housing and utilities, and transportation. The CBR warned that with capacity utilisation running at its maximum of around 80% and the labour market still constrained thanks to the war, the economy is already running at full tilt. Any growth going forward will have to come from productivity gains, not investment. State and municipal institutions will be required to adopt efficiency measures aimed at reducing administrative burden rather than increasing workloads.

Finally, the acceleration of “technological sovereignty” will be pursued through the development and widespread adoption of domestic innovations. These include artificial intelligence, automation, and digital platforms, with national projects focused not only on import substitution but on creating globally competitive Russian technologies.

A comprehensive review of progress in these areas is scheduled for mid-2026, when the Council will convene again to evaluate outcomes and consider additional measures, particularly in the demographic sphere.

Overview of national projects performance:

• 19 national projects are underway with a total of 121 indicators.
• 7 of these indicators are at high risk of non-achievement.
• Targets met in housing relocation, agricultural output, creative industries, energy technologies, waste management, and urban improvement.
• 42% of urban residents reported improved living conditions in 2025, up 5% from the previous year.
• Positive public feedback in transport infrastructure, domestic tourism, vocational and higher education, and e-government services.

Demographic policy:

• Rosstat reported continued decline in birth rates in 2024.
• A new national project, Family, was launched to support birth rates.
• As of November 1, 18 regions met or exceeded birth rate targets; 11 exceeded targets for third or subsequent children.
• A new family allowance will begin in 2026 for low-income families with two or more children.
• From January 1, 2026, employer-paid childbirth bonuses of up to RUB1mn (approx. $10,800) will be exempt from income tax and insurance premiums, up from RUB50,000 ($540).
• Birth rate indicators have been added to the performance metrics of regional governors.
• Government instructed to replicate successful regional demographic policies nationwide.

Economic and structural targets:

• 2025 GDP growth forecast: ~1%; inflation forecast: ~6%.
• 2026 inflation target: 4–5%, per Central Bank.
• Structural transformation plan to 2030 aims to generate high-tech jobs and boost domestic consumption.
• Fourth policy priority is formalising the national economy, reducing informal employment, and improving tax collection amid VAT rate increase.

Labour productivity:

• Labour productivity grew by an average 0.7% per year from 2021–2024.
• Negative or zero growth recorded in trade (-1.1%), housing/utilities (-0.2%), and transport/storage (-0.1%).
• By 2030, productivity programmes should cover 40% of medium and large non-resource enterprises, and all public sector organisations.
• Government instructed to expand sectoral productivity efforts and reduce administrative workload in health and education.

Technological leadership:

• National projects launched in 2025 focus on AI, automation, and unmanned systems; a bioeconomy project will be added in 2026.
• Projects must go beyond import substitution to create competitive domestic technologies.
• Productivity and economic reforms to be supported by technological innovation across all sectors.
• Technological policy oversight assigned to deputy prime ministers and ministers.