The President of the Russian Federation, Vladimir Putin, announced the government’s plans to reduce funding for the defense sector, which has reached its highest level since the Soviet era. This year, Russia’s military spending amounts to 13.5 trillion rubles, which represents 6.3% of the country’s total GDP of 223 trillion rubles. According to Putin, this percentage is too high for the state budget.
This is reported by Finway
“The economy has been growing by more than 4% annually.”
At the same time, the Russian dictator acknowledged that in 2025, the country’s GDP growth rate will slow compared to previous years. He explained this as a result of deliberate government actions aimed at combating inflation. To support budget revenues, which have suffered due to falling raw material revenues and the depletion of the National Welfare Fund, the Kremlin is initiating a tax reform for small and medium-sized businesses.
Decline in petroleum product exports and the consequences of sanctions
In June 2025, maritime exports of petroleum products from Russia fell to their lowest level since October 2024, averaging 2 million barrels per day. The reasons for this decline include prolonged repairs at oil refineries that were damaged after spring attacks by Ukrainian drones, as well as the authorities’ desire to accumulate fuel reserves ahead of the peak period of domestic consumption.
Budget deficit and decline in Russia’s revenues
The Ministry of Economy of Ukraine notes that due to international sanctions, in the first five months of 2025, Russia’s budget deficit reached 90% of the annual plan. Revenues from energy resource exports fell by 14%, and Russia lost about 90 billion dollars in oil sales profits. The activity of the shadow fleet transporting Russian hydrocarbons decreased by almost half in June. Additionally, in the first quarter of the current year, Russia’s GDP decreased by 0.6% compared to the previous quarter.
Despite this, according to estimates from the National Bank of Ukraine, Russia still retains the capacity for further financing of military aggression.