The Systemic Crisis Deepening in russia’s Economy

The government of the rf is unable to halt the recession in russia’s economy. At this, the deterioration of the situation is caused by both an increased tax burden (as of January 1, 2026, the VAT rate was raised from 20% to 22%) and a slowdown in the operation of social networks and internet services, as well as rising costs for logistics, labor, and marketing. As a result, 6% of businesses ceased operations in the first quarter of 2026 alone.

According to forecasts, a significant portion of russian companies are preparing for layoffs in the second half of the year, while about 30% of small and medium-sized businesses may exit the market.

The economic situation in russia’s regions is rapidly worsening. The consolidated budget deficit of russian regions had reached nearly 1 trillion rubles ($12.5 billion) by the end of January–February. Meanwhile, due to the lack of incentives to increase tax pressure, the number of regions showing a growing budget imbalance is rising.

Sanctions pressure and the federal government’s misguided policies have led to the collapse of customs revenue collection plans. Specifically, last year the federal customs service of the rf contributed 5.9 trillion rubles to the russian budget, compared to 7.35 trillion rubles in 2024 (–20%). This is the lowest figure since the start of the full-scale war against Ukraine. It should be noted that in 2022–2025, russia’s foreign trade balance decreased nearly threefold (from $337 billion to $125 billion).

In 2026, the negative trend continues based on the results for January–February, with the trade surplus having shrunk by 33% (to $14.1 billion) compared to the same period last year ($21 billion).

At the same time, the condition of the russian banking sector is deteriorating (in 2025, the net profit of russian banks fell by 8%), and the sector is on the brink of a systemic banking crisis. At this, the sector’s current stability is ensured by the dominance of state-owned banks (in 2025, “sberbank” and “vtb” accounted for more than 60% of the entire russian banking system’s net profit), large-scale restructurings of distressed assets, and regulatory easing.

A number of financial indicators (an increase in the share of “bad” loans, payment defaults, and the closure of bank branches) point to growing vulnerability in the banking sector and a higher probability of a full-blown banking crisis.

At the same time, the kremlin uses systematic distortion of macroeconomic statistics to create a false impression among foreign observers of the russian economy’s relative resilience to sanctions pressure and colossal military expenditures.