When the Piggy Bank Is Empty - Our Reporting on a Russian Economy at Its Limit

Russia’s economy enters 2026 weakened. Growth is slowing, oil prices are well below what the budget assumed, and the strong ruble compounds the problem in two ways: it reduces ruble revenues from exports and makes state planning even more unrealistic. In this mix, the next expansion of the budget deficit is already built in. And if oil prices do not rise noticeably, which few expect, the National Wealth Fund could be largely depleted this year. After that, the state would still be able to reach into the pockets of its own population through the domestic debt market, but that would be expensive and would very likely trigger the next wave of inflation.

The official picture of last year was already polished. Much of what was sold as growth was in fact war production: factories ran at full capacity while the civilian economy stood still. Output consumed on the battlefield creates no value for consumers, it fills no shelves and does not increase quality of life. Now even the official statistics are approaching stagnation. After around four percent in the previous year, growth in 2025 slipped toward one percent. Government forecasts fluctuate, the range of expectations is wide, but the direction is clear: less momentum, less demand, less confidence.

In government agencies and banks, expectations have been revised downward for months, not only for growth but also for wages and consumption. The warning that the country is moving dangerously close to a situation of weak growth and noticeable inflation is not accidental. Civilian industry is stagnating, utilization is falling, machines stand idle more often. On average it is only about 78 percent, in manufacturing roughly 70 percent. Even the defense industry, which continues to grow faster than the rest, cannot reliably prevent a recession. If gross domestic product tips into contraction, a prolonged dry spell looms.

For people, the most tangible lever is inflation. The state raised value added tax from 20 to 22 percent, and the price surge was immediate. In the first 19 days of January, prices rose 1.7 percent compared with December. Annual inflation stood at 6.47 percent in mid January, higher than in the previous month. Central bank governor Elvira Nabiullina warned that many companies had already begun adjusting prices in December, but the main pressure was still ahead. Higher housing and utility costs as well as other regulated fees are pushing the price level further upward.

The central bank relies on high interest rates, officially to curb inflation. But this policy has a second effect that Moscow has long calculated: it divides the economy into areas considered important and those that must step back. Loans have become too expensive for many civilian companies. Small and medium sized enterprises, construction firms and consumer goods manufacturers are cutting back investments and shelving plans. Labor, raw materials and energy are redistributed. While civilian firms must save, the defense industry operates outside normal market conditions: it receives direct budget funds, state contracts, advances and special loans. Households are also drawn into this system. High interest rates attract savings into banks, while dampening consumption. In the end, this is a form of indirect borrowing from citizens with which the state supports its spending.

For 2026, the budget officially plans a deficit of 3.8 trillion rubles, around 1.6 percent of gross domestic product. The crucial question is whether revenues will flow as the plan claims. About one fifth of federal funds depend on oil and gas. The state expects to take in more than in 2025 and builds this hope on an oil price outlook that appears unusually optimistic. The budget assumes a price of 59 dollars per barrel for Urals oil, while tax calculations in December were based on 39 dollars. That is not just optimism, it is a bet on a significant price recovery, even though many observers expect the opposite.

A look at the development of oil and gas revenues since 2018 shows how dependent the budget has become on outliers. In 2018 revenues stood at about 9 trillion rubles, 100 rubles roughly 1.09 euros, in 2019 they fell below 8 trillion, in 2020 they collapsed to just over 5.2 trillion due to the pandemic. In 2021 they returned to about 9 trillion. Then came 2022 as an exceptional year: more than 11.5 trillion rubles flowed into the coffers due to the energy crisis. In 2023 the figure dropped again to around 8.8 trillion. In 2024 there was another peak at just over 11.1 trillion. In 2025 revenues fell again to about 8.5 trillion. For 2026 the state is planning just under 8.9 trillion rubles.

What these figures show is not a stable curve, but a zigzag driven by global market prices and geopolitical special situations. The years 2022 and 2024 were not a new normal, but exceptional phases. In 2025 revenues are again below the level of 2018. And the planning for 2026 is based on a price development that hardly aligns with current forecasts for Brent. The budget thus rests on an assumption that is more hope than trend.

The facts from 2025 argue against this bet. Global oil prices fell by 19 percent, Brent declined on average from 82 to 69 dollars per barrel. Drivers were weaker demand growth and additional production by OPEC+. For 2026 further headwinds are added: China’s economy is cooling, fuel demand is growing more slowly. In the United States, protectionist measures by President Donald Trump are dampening global economic activity. On the supply side, additional volumes are expected, including from Venezuela following a U.S. agreement on imports of 50 million barrels. OPEC+ also plans further production increases. The U.S. Energy Information Administration expects Brent to average about 55 dollars in the first quarter of 2026 and to remain around that level throughout the year. For Russia’s budget, that is a hole the size of a tanker.

If oil and gas revenues fall significantly below assumptions, the state is legally required to draw on the National Wealth Fund. That is already happening. For January, the Finance Ministry reported a shortfall in oil revenues of 231 billion rubles compared to the plan. As a result, the state began selling yuan and gold from the fund at a record pace: 12.8 billion rubles per day, faster than during the pandemic. If this pace continues, the liquid funds currently about 4 trillion rubles could be largely exhausted by year’s end. Then the financing gap for 2027 will face a new reality.

If only domestic borrowing remains, it will be costly. With unemployment already low, additional demand could intensify price pressures. There is also currency risk. The ruble was a surprise in 2025: it appreciated 45 percent against the dollar, stronger than almost everything except precious metals. But an unusually strong ruble is no gift for the budget and no guarantee of stability. Many expect an average of about 90 rubles per dollar, the budget assumes 92.5. That sounds close, but the danger lies in the turning point. If the central bank lowers rates, importers could buy foreign currency on a large scale, the exchange rate could quickly reverse, and price surges would return. Devaluation remains the greatest sword of Damocles because it immediately passes through to import prices.

The year 2026 hits the regions particularly hard. They feel changes in the tax system more than the center, they struggle with outflows, rising prices, departing companies, declining profitability and job losses. Many regional budgets are preparing strict austerity programs, including in education and health. In the regions the mood is significantly darker than in Moscow. Belts are tightened there, employment shrinks, and lower demand is expected. Companies with high debt come under pressure, while cautious firms that preferred to keep money in accounts rather than take loans are comparatively better positioned. Overall, pressure from tax authorities and tighter administration has increased after the hikes.

In Moscow, by contrast, the situation appears as if from another country. There is noticeable interest in future oriented seminars, and some seriously expect sanctions to be lifted and foreign companies to return. There is hope for a stock market boom in the event of a Ukraine agreement, for prices that could double or triple. This expectation feeds on the concentration of money flows in the capital, including war profits that land there and distort perception.

In this situation, Putin presides over a system that projects stability outward but increasingly relies internally on reserves, windfall gains and administrative pressure. He governs not a collapsing state, but an economy in a mode of permanent redistribution in which military priorities replace growth and political control replaces economic dynamism.

The central diagnosis of most economists is sober: the main problem is not a sudden collapse, which few expect for 2026, but the absence of genuine growth sources. One does not fall into catastrophe, one slides into a slowly worsening normality. Stagnation, quiet decline, values around zero, while people become poorer step by step. Even a possible ceasefire would change little, it would at best reduce uncertainty. A broad easing with the West, new investments, a fresh flow of capital all that appears unlikely under the current leadership. Nationalizations have destroyed trust, China largely limits itself to trade and shows little appetite for large investments in Russian assets.

A country can function like this for a long time, experts say, but it pays the price anew each year: additional measures, more fees, more taxes, further cuts in non military areas. Everyone adapts. It is not a crash, but it is not a renewal either. In the final analysis, 2026 will be a year in which the state, companies and households do not grow, but must sort out what remains affordable. And what does not.