How Russia's mounting economic woes could force Putin's hand DW 09/25/2025

"The pressures of the war in Ukraine are starting to bite for Russian President Vladimir Putin and his policymakers in the Kremlin, with Moscow planning tax hikes and spending cuts to deal with its growing budget deficit. The draft budget for 2026 is expected to be submitted to parliament on September 29. Only minor changes are likely from that point, with Putin having agreed the main details by then."

"On Wednesday (September 25), the government announced plans to raise value added tax to 22% from 20% in a bid to curb the deficit, reneging on a pledge Putin previously made not to raise taxes before 2030. There is also growing expectation that nondefence spending, including some social spending, will be cut to deal with the mounting pressures caused, largely, by plunging oil revenues."

"However, Elina Ribakova, an expert on the Russian economy with the Kyiv School of Economics, expects Moscow to continue what she says is an established pattern of maintaining high military spending by making cuts elsewhere. "The consequences are the same as we have seen since 2014," she told DW. "That is: everything else gets cut, the military spending expands. So, education, health care, social spending, environmental protection, all of that gets cut severely." Russia's massive defense spending hike has put pressure on its budget"

Moscow plans to raise value added tax from 20% to 22% and implement spending cuts to reduce a widening budget deficit caused largely by plunging oil revenues and increased defense spending. The 2026 draft budget will be submitted on September 29 with few expected changes after presidential agreement. The budget deficit has risen to about 4.2 trillion rubles (around $50 billion), roughly 1.9% of GDP, with forecasts of 5.7 trillion rubles by year-end. Expectation grows that nondefense and some social spending will be cut while military expenditures remain prioritized, reducing funding for education, health care, and environmental protection.

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