Russia's unrealistic budget plan

Officially, Russia expects a budget deficit of 2.6% of GDP this year. It will be closer to 3.5% of GDP unless a miracle happens.

In January-October 2025, Russian budget spending was 34.1 trillion rubles, while revenues amounted to 29.9 trillion rubles, according to the latest data from Russia’s Finance Ministry. For the full year, the ministry expects expenditures of 42.8 trillion rubles and revenues of 37.1 trillion rubles. This results in a deficit of 5.7 trillion rubles, or 2.6% of GDP.

The problem is that 42.8 trillion rubles appears almost impossible to reach this year. After September 2025, Russia had already spent 72% of that amount. After October, Russian spending was already 80% of the full-year plan.

If the Russian budget execution from 2011 to 2024 is any indication, the normal levels of execution are 66% in September and 74% in October. Russian budget spending is 6% too fast. Below is a graph showing the historical percentages for September (blue) and October (orange) spending. The bars indicate the number of years in which execution was at the percentage level shown on the left.

As you can see in the table, if the total for 2025 were actually only 42.8 trillion, the values for September and October of that year would be highly unusual. September and October of 2025 would fall far outside the historical distribution. Looking at these numbers, it seems much more likely that the total for 2025 will be higher, shifting the percentages for September and October somewhere closer to the historical distribution.

Execution of budget expenditures after September and October 2011-2024, compared to execution after September and October 2025.

A forecast can be built based on budget execution in September and October from 2011 to 2024. If actual spending in September 2025 were 66% of the total (the average from 2011 to 2024), the total for 2025 would be 45.3 trillion rubles, which is 2.5 trillion rubles more than planned. Similarly, if actual spending in October 2025 were 72% of the total, the total for 2025 would be 45.2 trillion rubles, or 2.4 trillion more than planned.

Meanwhile, revenues were almost perfectly in line with past patterns. Russia was slightly ahead of schedule in September 2025 (0.7%) and slightly behind schedule in October 2025 (-0.3%).

Taken together, it looks like Russian expenditures will be around 1% of GDP higher than expected, while revenues will be pretty much on target at the end of 2025, resulting in a deficit that is closer to 3.5% of GDP instead of the 2.6% of GDP the Finance Ministry officially claims to plan for.

This forecast comes with a disclaimer: Revenues and expenditures may deviate from historical patterns.

Total revenues may be higher by the end of 2025 because certain taxes, which are mostly paid in the last quarter, were increased (e.g., personal income tax and utilization fee). Meanwhile, revenues that accrue more evenly throughout the year are lower this year (e.g., mineral extraction tax and VAT on imports).

Expenditures could also be lower than expected. There are some signs of a slowdown in economic sectors that are related (but not identical) to the arms industry. This could mean that Russia is trying to reduce war spending. Much of arms procurement is paid for late in the year, so fewer weapons purchased means less spending in December. However, I’m skeptical that there is actually a slowdown in arms manufacturing. The impression of a slowdown is more likely caused by the decline in civilian production, which is included in the same statistical categories.

Back in February, Russia’s Finance Ministry claimed that it already paid in advance for (arms) procurement contracts, which - in theory - would make it possible to avoid a higher deficit in December. However, it stated the same in February 2023, and spending in November and December 2023 was still more than 25% of the full year. For Russia to achieve its planned spending, November and December 2025 would need to account for no more than 20% of the full-year total, which would be highly unusual.

Finally, Russia could try shifting expenditures into next year to avoid a higher deficit.

However, despite all the above disclaimers, the most likely scenario is a significant budget overrun. It will be interesting to see how and when the Finance Ministry begins to communicate this.