Russia plans a RUB5.5 trillion ($65bn) federal deficit in 2027, 72% more than it pencilled in a year ago, as the economy slows and spending keeps rising.

The Finance Ministry sent its 2027-2029 budget package to the government on September 24 and the cabinet approved it the same day. Revenue is set at RUB43.3 trillion ($510bn) and spending at RUB48.8 trillion ($575bn), leaving a gap of 2.2% of GDP next year and an average of about 2% a year over the three years, Prime Minister Mikhail Mishustin told the government meeting, Kommersant reported. The bills are due in the State Duma by the end of the month.

The new plan accepts a structural deficit twice the size of the one it replaces and leaves most of the adjustment to taxpayers. Against the 2027 figures in the current budget law, planned revenue is only RUB0.4 trillion higher while spending is RUB2.7 trillion higher, according to Renaissance Capital. It lands as the Economy Ministry concedes that investment will fall 5.4% this year and barely grow in 2027, that inflation will end 2026 at 6.8% and that consumers, not companies, will have to carry what growth there is.

The budget buys the Kremlin's three priorities - welfare, the war and technology - and pays for them with another round of tax rises and a lower oil benchmark. The economy it rests on is getting weaker: investment is in its sharpest fall in more than a decade, business is afraid of the state, and households are spending their savings. None of that adds up to a crisis. Russia can still fund a deficit of this size at home, though it will cost it growth.

Guns, pensions and a $50 oil price

"The draft budget is balanced. It will enable the state to fulfil all its obligations and maintain macroeconomic stability despite any potential changes," Finance Minister Anton Siluanov said in the ministry's statement.

The ministry lists defence and security, social support for soldiers who have fought in Ukraine and their families, and "technological leadership" as the budget's strategic priorities, but did not publish a figure for military spending. Insurance pensions will be raised twice in 2027, by 6.8% on February 1 and a further 3.3% on April 1, taking the average old-age pension to RUB29,904 ($352) by year-end. A "children's budget" of RUB10 trillion ($118bn) over three years includes the unified child benefit, and about RUB1.9 trillion ($22bn) goes on housing programmes for families with children, part of the Kremlin's push to lift a collapsing birth rate.

Almost RUB2 trillion is earmarked for technology national projects over three years, with the machine-tool and drone programmes rising to RUB135.7bn ($1.6bn) and RUB103.3bn a year respectively by the end of the period, and RUB205bn going to recapitalise the Industrial Development Fund. Roads get more than RUB4.4 trillion ($52bn) over three years. Regions will be allowed to push back repayment of budget loans falling due in 2027-2029 to 2030, freeing about RUB300bn ($3.5bn).

To make room, the government plans about RUB2 trillion ($24bn) of cuts to lower-priority spending over the three years, Kommersant reported. The budget is also built on $50 oil: from 2027 the fiscal rule's cut-off price, above which oil and gas revenue is saved in the National Wealth Fund, drops to $50 a barrel from $59 this year. The Economy Ministry expects Urals crude to average $53/b in 2027, up from $50 in its May forecast, Interfax reported.

Old plan, new plan

The table compares the new draft with the 2026-2028 budget passed last November and with the latest estimates for this year.

Russia's federal budget, old plan versus new. 2026 latest estimate: revenue from the Accounts Chamber, deficit ceiling from Finance Minister Anton Siluanov, macro figures from the Economy Ministry's September 2026 forecast. Sources: Finance Ministry, Economy Ministry, Accounts Chamber, Renaissance Capital, Interfax, IntelliNews.

The last budget did not survive contact with 2026. It set a deficit of RUB3.786 trillion ($45bn), or 1.6% of GDP, on revenue of RUB40.3 trillion, when it passed the Duma last November. Siluanov now says this year's gap will be at least double that, though within 3% of GDP, or about RUB7 trillion ($82bn). The state auditor expects revenue to come in RUB1.6 trillion short of plan, all of it from oil and gas, after a strong ruble cut the value of export earnings, and the government lifted its own spending ceiling in June so it could spend past the budget law without going back to parliament.

The new numbers should be read with that in mind: Russia's budget has not been executed as written in any recent year, Kommersant noted.

Taxes fill the gap

Most of the extra revenue comes from households and miners. The package moves dividends, deposit interest and other "passive" income onto the progressive 13-22% personal income tax scale, charges the full 22% VAT on goods bought from foreign online stores, adds a RUB100 ($1.18) customs fee on small parcels from abroad, and imposes a 30% levy on the extra income miners and fertiliser producers earned from higher world prices, 20% for gold, according to the Finance Ministry. The ministry says the passive-income change will hit no more than 6% of taxpayers, about 4mn people, and leaves the RUB1mn tax-free threshold for small savers in place.

The rises were unveiled four days after a Duma election that returned United Russia with a two-thirds majority, and a fortnight after the Kremlin said tax increases were not being discussed.

Investment falls off a cliff

The Economy Ministry's updated forecast, which the budget is built on, now expects fixed investment to fall 5.4% this year, the steepest drop since 2015, against a 1.5% decline it predicted in May, and to grow just 0.2% in 2027 instead of 2%. On that path investment only returns to its 2025 level in 2029, and is still 2.3% below 2024, The Moscow Times calculated. Investment fell almost 10% year on year in the first half, including a 6.6% drop in the second quarter.

"The correction turned out to be longer and deeper than we planned," Economy Minister Maxim Reshetnikov said, blaming "general uncertainty" and "infrastructure risks" as well as interest rates that the central bank now expects to fall more slowly. The Bank of Russia paused its easing cycle at 14% on September 11.

GDP is forecast to grow 0.6% this year, up from the 0.4% the ministry expected in May and within the central bank's 0-1% range, and 1.4% in 2027, rising to 2.4% by 2029. The ministry raised its end-2026 inflation estimate to 6.8% from 5.2%, mainly because of fuel prices after Ukrainian drones knocked out refinery capacity, and sees the ruble weakening from an average RUB79.5 to the dollar this year to RUB87.4 in 2027. Industrial output is expected to shrink 0.2% this year, and fell 0.6% in August alone, with petroleum products down 17.9%.

There are pockets of growth. Drug production is forecast to rise 12.1% this year, though growth of the pharmaceutical market is expected to slow to 6.6% in 2027 from 14.2% in 2025, the ministry said.

Sberbank chief economist Alexander Isakov told Forbes Russia that the fall comes after investment rose 38% in real terms between 2021 and 2024, and that a Bank of Russia survey shows uncertainty, for the first time since 2022, limiting investment more often than a lack of money. He argued that the economy is not "overcooled", since other indicators are holding up, but that a sustained recovery needs interest rates at 12% or lower. Grigory Zhirnov of the Higher School of Economics warned that three years of falling investment would erode productive capacity and long-term growth.

Afraid of the state

Big business has stopped investing in its core operations and is moving money "to the side" because it fears everything will be taken away, VTB chief executive Andrei Kostin told a banking forum in St Petersburg on September 24, Nezavisimaya Gazeta reported. "I think these are exaggerated fears, but they really do exist," he said. "Business needs to be protected - it is such a delicate category."

The fears have a basis. The state has seized assets worth RUB7.6 trillion ($90bn) from their owners in four and a half years of war, including Domodedovo airport, gold miner Yuzhuralzoloto and agricultural holding Rusagro, according to law firm Nektorov, Saveliev & Partners, The Moscow Times reported. This month Putin nationalised the Russian assets of Auchan, Nestle and Leroy Merlin. "Investing in any expansion of business activity now is complete madness," economist Vladislav Inozemtsev told the paper. In the second quarter, 86% of top managers polled by the Russian Union of Industrialists and Entrepreneurs (RSPP) said they had been forced to cut costs and 19% had curtailed investment programmes.

Companies also want the state to tell them how to protect plants from drones, and to let them write off the cost against tax. A presidential decree allows the state to put companies that fail to protect critical infrastructure under temporary management, but there is still no standard for what counts as adequate protection, RSPP head Alexander Shokhin said. Overdue corporate loans have risen 4%, and fastest among small and medium-sized businesses, said Anatoly Aksakov, head of the Duma's financial markets committee.

Consumers carry the load

With investment flat, the ministry is relying on households. It expects consumer spending to grow 4.1% this year, up from 1.2% in its May forecast, and 2.4% in 2027, even though real disposable income rises only 1% and 1.4%. The gap is covered by saving less: the household savings rate is forecast to fall from a record 16.6% in 2025 to 9.5% this year and 7.5% by 2029, Kommersant reported. Some of that money will go on bills rather than shopping, as the ministry has pencilled in an 11% rise in regulated utility tariffs in July 2027, and the tax on deposit income may push savers towards cash rather than into the shops.

Wages in tourism and restaurants are rising 25% year on year, faster than in any other sector, because of a shortage of staff, though they remain low in absolute terms, Reshetnikov said on September 25, Interfax reported. The ministry has cut its forecast for real wage growth in 2027 to 1.8% from 2.5%.

Commodities analyst Nicholas Trickett read that as a sign that broad-based wage growth has run its course. "State spending no longer provides an additional boost to demand," he wrote in Riddle on September 25, arguing that deficits now sustain consumption at its current level rather than drive it higher, and that if the Finance Ministry succeeds in shrinking the deficit the adjustment will fall on households. He counted 1,454 construction company bankruptcies over the past three months, 41% more than a year earlier, and noted that only 36% of industrial companies surveyed by the Institute of Economic Forecasting in September called demand for their products "normal". "The Kremlin faces a longer trough than officials suggest," he wrote.

Painful, not a crisis

The economy is clearly weaker than a year ago, but the budget arithmetic still works. A deficit of 2.2% of GDP is modest by international standards, and the primary structural deficit, which strips out extra oil revenue and debt service, is forecast at RUB1.5 trillion ($18bn), or 0.6% of GDP, in 2027 and 0.2% in 2028, less than the central bank assumed in July, Renaissance Capital noted. Oil and gas now supply only about a fifth of federal revenue, so a $50 benchmark leaves room for upside if prices stay high, and the Finance Ministry expects to add RUB600bn-RUB1 trillion to the National Wealth Fund by year-end.

The money is there to borrow. The ministry raised RUB2.3 trillion ($27bn) from OFZ treasury bonds in the first half, state debt stood at RUB37.5 trillion ($442bn) in June, still below the government's own ceiling of 20% of GDP, and the National Wealth Fund held RUB13.1 trillion ($154bn). Russia can fund its war from domestic resources for years yet, though the ministry's own long-term projections show the budget staying in deficit until 2042.

The price is paid in growth. Higher taxes on savers and companies, a real-terms squeeze on civilian spending, key rates held at 14% and a business class afraid of nationalisation mean the megaproject boom of 2023-2024 will not be repeated soon. With inflation expectations back at 14.2% and fuel rationing returning to regions as drones hit refineries, Russia is looking at several years of growth of around 1-2% a year, paid for by its own citizens.