War pressures in Russia prompt further fiscal tightening

Russia’s draft budget for 2026-28 announced this week suggests that policymakers are committed to fiscal tightening, through tax hikes to raise additional revenue and efforts to control military and social spending. We think the projected 2026 deficit of 1.6% of GDP is optimistic for various reasons, though, and that the actual deficit will come in wider than planned. This will keep the focus on the need for additional fiscal tightening.