The kremlin Acknowledges the Protracted Decline in the Economy

The russian government has approved a socio-economic development forecast that effectively confirms a chronic budget deficit until at least 2042. By the end of 2025, the federal budget deficit will exceed $71.7 billion and will continue to grow regardless of the scenario. In the baseline scenario, it will reach $271.9 billion in 2042 (2.9 % of GDP), in the conservative scenario – $688 billion, or 8.4 % of GDP, indicating a loss of fiscal control for many years to come.

The key problem with the forecast is the rapid growth of expenditures in the absence of an adequate revenue base. Under the baseline scenario, budget expenditures will triple, from $538.8 billion in 2025 to $1.6 trillion in 2042, and under the conservative scenario – to $1.8 trillion, or more than 22 % of GDP. At the same time, budget revenues will grow by an average of only 2.1  % per year, which does not even cover inflation and debt risks.

A separate negative signal is the degradation of the oil and gas model. According to the government’s forecasts, the share of oil and gas revenues in GDP will decline from 4 % to 1.9 %, while the ruble will devalue to 133 for one US dollar by 2042, compared to 79.43 as of December 17. This highlights the structural weakness of the economy and the limited foreign exchange earnings in the long term.

The imbalance will result in a sharp increase in public debt. In the baseline scenario, it will reach US$3 trillion (32.2 % of GDP), and in the conservative scenario – US$5.7 trillion, or almost 70 % of GDP. According to the logic of the forecast itself, a significant portion of new borrowing will go not toward development but toward servicing the debt, exacerbating the debt spiral.

Even the National Welfare Fund is not a stabilizing factor. Despite nominal growth in the baseline scenario, its share in GDP is declining, while the conservative scenario envisages a threefold drop in assets to 1 % of GDP.

Despite the obvious propaganda aim of the document – to demonstrate long-term “stability” – the forecast itself is based on an optimistic and unrealistic assumption of about 3 % growth of the annual real GDP. Taken together, these parameters signal not stability, but a protracted, structural decline in the russian economy, which the government is already forced to acknowledge in its own calculations.