Trillion dollar disputes: will the budget deficit break through the ceiling
Russia's budget is increasingly becoming the subject of controversy and gloomy forecasts. The reason is the deficit, which exceeds all standards (which, in turn, have been repeatedly revised upward). By the end of seven months, expenditures exceeded budget revenues by almost 5 trillion rubles, and some forecasts give a total deficit of 8 trillion rubles for the year, which has not been the case for a long time. At the same time, this year's "fiscal impulse" — the growth of government spending — has almost no effect on inflation. How much the deficit can grow and how dangerous it is for the economy and the budget — in the material of Izvestia.
They don't put it off for later
Last year (as in many other years), the budget deficit was almost zero until last month, but in December there was a sharp injection of public funds into the economy, resulting in 1.7% of GDP. This is less than in the previous two years, but nevertheless enough to have a significant impact on inflation. In 2025, it is on a much higher trajectory than a year ago.
According to the results of the first seven months, the accumulated budget deficit amounted to 4.88 trillion rubles. In the first seven months of 2025, the federal budget received more than 20.3 trillion rubles, which is 2.8% higher than last year's revenue. But the volume of expenses exceeded the same period in 2024 by more than 20%. At the same time, the annual deficit plan (3.78 trillion rubles) has already been exceeded in these months. For the most part, this difference is financed by accumulated bank balances (3 trillion). The rest is due to loans.
Extrapolating these figures from the experience of previous years, as some analysts do, we can conclude that by the end of the year the deficit will reach 8 trillion rubles. How likely is that? The Ministry of Finance says that this year, many expenses were funded ahead of schedule in January. That is, the expenditure part is more evenly distributed over the current year, rather than being dumped at its end. At the same time, there may be income problems: the Ministry of Economy's plan is probably overstated. First, GDP growth is likely to be lower than budgeted. And secondly, inflation will be one to one and a half percentage points less than in the plan (7.6%). All of this hints that earnings will be lower than expected.
By the way, the increase in expenses is not yet particularly noticeable in the statistics of M2 money supply growth, which is still weaker than the usual levels for this period of the year. That is, the increase in government spending is offset by a decrease in money creation in other sectors of the economy.
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According to Olga Belenkaya, head of the Macroeconomic analysis Department at Finam, estimates of a possible budget deficit for the year are still in a fairly wide range.
— The currently most stringent budget deficit forecast of about 8 trillion rubles may involve extrapolating the budget deficit from the first half of the year to the second half of the year, or assuming that the spending schedule will be close to the dynamics of last year. At the same time, the Ministry of Finance plans to achieve a uniform intra—annual cost trend this year — about 25% per quarter, the expert points out.
Note that 8 trillion rubles is presumably about 4% of nominal GDP. Historically, this is a lot: the last time such an indicator was in covid 2020. At the same time, by world standards, a 4% deficit is not out of the ordinary in Russia, where they have always strived for a balanced budget. Olga Belenkaya added that based on the current dynamics of budget execution, it can be concluded that in order to fulfill the annual plan, the budget surplus in the remaining five months of the year should amount to about 1 trillion rubles, and expenditures in nominal terms should decrease by 11% by August – December last year.
— In our opinion, it is still difficult to expect such a strong reduction. There will be a new refinement of budget projections in the fall and, most likely, the budget deficit forecast will be increased again. It is unlikely that it will amount to less than 5 trillion rubles, but the estimate of about 8 trillion rubles still seems excessive," Belenkaya added.
In turn, Anton Tabakh, chief economist at the Expert RA rating agency, says that the December peak in budget payments is getting smaller every year, and the significant increase in expenses in January and February was due to prepayment of contracts.
— In 2025, December should be much less significant. We expect monthly surpluses by the end of the year and a deficit of 4.5–5 trillion rubles by the end of the year. 8 trillion — the scenario is possible only with "black swans" (unexpected shock events. — "Izvestia") on a fairly large scale, — he notes.
Zero pulse
The most interesting thing is that the huge expenses incurred by the beginning of August had almost no effect on the price increase. To date, we have had five consecutive weeks of deflation and annual inflation, which has dropped from double-digit levels to 8.5%. A strong fiscal impulse was supposed to boost prices. Why didn't this happen?
— The impact of the fiscal impulse on inflation this year is less noticeable due to a significant slowdown in credit growth (which affects the slowdown in the dynamics of monetary aggregates) and the strengthening of the ruble (the effects of a tight monetary policy), — says Olga Belenkaya. — In addition, it was planned that the budget momentum itself would decrease this year. The Central Bank and the Ministry of Finance have repeatedly stated that the normalization of fiscal policy and the return to the budget rule included in this year's budget parameters should have a disinflationary effect.
The expert added that this year's budget includes a transition to a zero structural primary deficit.
— At the same time, in the summary of the key rate discussion at the July meeting, the panelists concluded that in the first half of 2025, the execution of federal budget expenditures was close to the trajectory of 2023-2024 and the structural primary deficit remained. At the same time, the hope was expressed for the implementation of the plans of the Ministry of Finance, taking into account the government's information on the desire for an even distribution of costs within the year.
Anton Tabakh, for his part, attributed this phenomenon to the fact that this year's budget problems are mainly on the revenue side, not on the expenditure side. The latter are quite tightly controlled (they are growing as planned), with the exception of those related to the high rate.
— But incomes are suffering from a strong cooling of the economy and a strong ruble, even with an increase in the income tax rate, revenues are not growing, not to mention a sharp drop in oil and gas revenues. That's why there's no momentum.
Thus, concern about the high budget deficit is hardly justified. As we can see, it has virtually no effect on inflation — other factors turn out to be more important. There is also no problem of liquidity leaching into the government securities sector from other areas. If we consider the deficit as a process of accumulation of public debt, then there is no reason to worry at all: Russia's debt is less than 20% of GDP. Considering that even for developing countries the norm is 40-60%, Russia could have had such deficit figures for literally decades just to reach the global median value of this indicator.
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