Russia will prioritise military spending

Significance The three-year budget incorporates tax rises on corporations and households legislated earlier this year. After two years of ad hoc measures to increase revenues, the government now has more room to manoeuvre as it seeks to meet the demands of the war in Ukraine and the national goals decreed by Putin after his election victory in May. Impacts Continued fiscal expansion will increase inflationary pressures and may lead to a longer period of higher interest rates. Allocating large sums of public money to the military will reduce the incentive to invest in the rest of the economy. Falling profitability in sectors most affected by sanctions could force the government to increase transfers to the worst-hit regions.