A slowing wartime economy pushes the Kremlin to tap consumers for revenue

After two years of robust growth fueled by military spending on the war in Ukraine, Russia’s economy is slowing. Oil revenues are down, the budget deficit is up and defense spending has leveled off.

This year’s budget deficit has been revised upward from 0.5% to 2.6%, up from 1.7% last year. That doesn’t seem huge in comparison with other countries — but unlike them, Russia can’t borrow on international bond markets and must rely on domestic banks for credit.

“For the coming 12 or 14 months, Putin has enough money to maintain the current war effort and the current level of expenditures.”

After that, “he will need to make tough choices, trade-offs between maintaining military effort or, for example, maintaining consumer abundance so people won’t feel 100% that the war is going on.”