A rising budget deficit and slowing growth are increasing pressure on the Russian economy as the country enters its second day of parliamentary elections. According to economists and analysts, heavy defense spending to fund the four-and-a-half-year invasion of Ukraine is weakening consumer sentiment and business stability, though high global oil prices continue to provide a critical revenue baseline for the state.
The economic strain follows a period of growth in 2023-24, where annual expansion peaked at over 4 percent. However, the government now forecasts growth of just 0.6 percent for the current year. While the economy rebounded in the second quarter after shrinking in the first, indicators of consumer sentiment have drifted down from their 2024-25 peaks. Recent Ukrainian drone strikes on refineries have also caused fuel price increases and shortages, while strikes against online retailers like Wildberries and Ozon have disrupted small business inventories.
By the end of July, Russia’s budget deficit reached 2.8 percent of annual economic output, nearly double the original target. Available resources in the national reserve fund have dropped to 1.6 percent of GDP. Janis Kluge of the German Institute for International and Security Affairs noted that the government is forced to borrow from domestic banks at interest rates as high as 17 percent to cover these gaps. Meanwhile, the central bank has maintained high rates to control inflation, a move that analysts say creates additional stress for civilian companies that lack the credit access granted to defense firms.
The scale of the Russian economy's reliance on energy is significant. Oil export revenues, which had dipped below $10 billion per month before the Iran war, rose to $15.8 billion in June and $13.8 billion in July. Torbjörn Becker of the Stockholm School of Economics noted that these elevated prices effectively mask budget constraints for now, but described the long-term path as unsustainable. A shortage of skilled labor is further complicating the outlook, as hundreds of thousands of younger people have emigrated since 2022 to avoid conscription or political repression.
In the immediate term, the Russian government maintains that macroeconomic stability is secure. Kremlin spokesperson Dmitry Peskov stated that monthly deficit figures are volatile and not a cause for concern. However, Andrei Klepach, chief economist of the state-owned VEB.RF bank, cautioned that international sanctions and isolation are causing Russia to fall behind in global technological competition. Parliamentary elections, which began on Friday, September 18, 2026, are scheduled to conclude on Sunday, September 20, 2026.