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Russia’s Economy Slows: Kremlin Boosts Taxes Amid War Strain

Source: Russia’s slowing wartime economy pushes Kremlin to increase taxes and fees (2025-11-18)

Russia’s wartime economy, which experienced significant growth over the past two years due to military spending on Ukraine, is now facing a slowdown. Oil revenues have declined, the budget deficit has widened, and defense expenditures have stabilized, prompting the Kremlin to seek new revenue sources. To stabilize finances, President Vladimir Putin’s government plans to increase the value-added tax (VAT) from 20% to 22%, potentially generating an additional 1 trillion rubles (approximately $12.3 billion) for the state budget. This legislative move, already progressing through Russia’s parliament, is set to take effect on January 1, 2026. The decision reflects broader economic challenges, including declining energy exports, inflationary pressures, and international sanctions that have impacted Russia’s economic resilience. Recent facts highlight that Russia’s GDP growth has slowed to around 1.2% in 2025, down from over 3% in previous years, largely due to reduced oil exports and global market shifts. The country’s inflation rate has risen to approximately 8%, affecting consumer purchasing power and small business operations. Meanwhile, Russia’s foreign reserves have decreased by nearly 15% over the past year, signaling financial strain. The Kremlin’s increased taxation measures are part of a broader strategy to maintain fiscal stability amid geopolitical tensions and economic sanctions. Additionally, Russia is exploring diversification of its economy, investing in sectors like technology and agriculture to reduce reliance on energy exports. Experts warn that these tax hikes could further burden ordinary Russians and small enterprises, potentially slowing consumer spending and economic growth. However, some analysts believe that these measures are necessary for Russia to sustain its military and geopolitical ambitions in the face of economic headwinds. As Russia navigates this complex economic landscape, the global community closely monitors how these fiscal policies will influence both domestic stability and international relations. In conclusion, Russia’s economic slowdown has prompted the Kremlin to implement increased taxes and fees, aiming to shore up public finances amid declining revenues and geopolitical pressures. The coming months will reveal how these fiscal adjustments impact Russia’s economic recovery and its broader strategic objectives. With ongoing sanctions, fluctuating energy markets, and internal economic reforms, Russia’s economic future remains uncertain but critically important on the global stage.

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