The Russian economy is in a dangerous zone. Some experts even speak of a "death zone", in which the budget lacks "oxygen" - oil and gas revenues are falling, and all resources are thrown into the military sphere.
In early January, Russian President Vladimir Putin instructed the government and the Central Bank to prepare a program to accelerate the Russian economy. It should become a reality by June, but it is already clear – officials are not at all sure that the task is feasible.
At first, the government assumed that in 2026, Russian GDP would grow by 1.3 percent – i.e. slightly more than in 2025, when the increase was one percent. According to information from the “Bloomberg“ agency, however, in April the forecasts will probably be lowered to 0.7-1 percent. These expectations also coincide with the estimates of the World Bank and the EBRD, which are for 0.8 percent.
Instead of discussing a possible acceleration, the authorities are forced to think about how to mitigate the consequences of the slowdown, which is a fact in the conditions of a decline in Russian oil export revenues. Finance Minister Anton Siluanov has already announced a correction in budget policy and warned that if nothing is done, Russia risks quickly depleting its National Welfare Fund.
What is happening in the Russian economy
For most of 2025, economic dynamics in Russia gradually weakened. GDP growth slowed from 1.4 percent in the first quarter to 0.6 percent in the third. Data for the fourth quarter have not yet been published, but it is clear that the dynamics have improved somewhat - otherwise an annual growth of 1 percent would not have been possible.
But this is not a reason for optimism. The jumps at the end of each year are characteristic of the Russian economy, as is the slower pace in the following quarter. Figuratively speaking, the Russian economy is in the “death zone“ - as mountaineers call the altitude at which the body begins to self-destruct from lack of oxygen, writes in “The Economist“ analyst Alexandra Prokopenko.
The essence of the metaphor she uses is that the weak economic growth in Russia is supported by large-scale budget expenditures related to the war against Ukraine. Civilian sectors are either stagnating or being cut back as resources – labor, credit, and investment – are diverted to the military. The budget is running out of “oxygen,” i.e., revenue, because oil and gas revenues are growing slowly due to the general economic slowdown, and oil and gas export revenues are declining due to falling fuel prices.
Against all this, it is increasingly difficult to talk about accelerating growth – and the authorities are having to deal with the redistribution of limited resources.
How are resources redistributed?
One of the measures aimed at redistributing limited resources will be a change in budget rules. According to Finance Minister Siluanov, the new parameters will be presented within a few weeks.
The essence of the budget rule is that the majority of oil surplus revenues are directed to the National Welfare Fund (NWF). When there is a shortfall in oil and gas revenues in the budget, it is compensated at the expense of the NWF – as it is currently.
Over the four years of war, the liquidity of the National Bank Fund has halved: from 8.78 trillion rubles on February 1, 2022 to 4.23 trillion on February 1, 2026.
The tightening of the budget rule will allow the government to maintain reserves for “rainy days”, but it will create a new problem: if budget revenues decrease, it will be necessary to either cut spending or increase debts.
What will the budget restructuring mean for citizens?
It is not yet known whether the Ministry of Finance will adjust spending this year. If such a decision is made, it is likely that civilian sectors will be affected - the state has not spared military spending so far. If the debt increases through the issuance of government bonds, this will also have consequences, because it can increase inflationary pressure, and the main thing is that it will create a deferred burden: the larger the debt, the more funds will have to be allocated for its servicing.
According to the Ministry of Finance, by 2026 the cost of paying off interest on the state debt will already exceed the cost of education and healthcare. Any such scenario will also include the likelihood of a noticeable weakening of the ruble.