Russian macro: budgetary policy to be thriftier
On September 29, the government released its revised 2026-2028 macroeconomic forecast and presented to the Duma a draft federal budget for the same period. While this year’s economic performance has been weak (aligning with the CBR's previous warnings), the government anticipates 1.0% GDP growth. Recently, economic growth has slowed across the major sectors amid the ongoing disinflation and due to a still high key rate, which the CBR reduced by 100 bps in mid-September to 17.00%. The economy is no longer overheated, as household credit growth has stalled since late 2024, and budget expenditures have risen moderately amid revenue shortages.
It seems crucial that, as opposed to previous years, the government has chosen to limit expenditure this year. Despite revising the 2025 budget due to lower revenue expectations, it stayed committed to controlling the budget deficit. The government also plans to avoid increasing spending too much in 2026 and beyond, aiming to keep the federal budget deficit well below 2.0% of GDP.
The key takeaway from the documents that the government made public yesterday is that next year could be a tipping point for the Russian economy as the growth model in a broader sense will likely start to change amid budget constraints.
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