Russia's budget share nears OECD average

The share of Russia’s consolidated budget expenditures in its GDP has grown significantly, narrowing the gap with the Organization for Economic Cooperation and Development (OECD) from 10 percentage points in 2011 to 3.3 percentage points in 2023. Alexandre Isakov, an economist from the Sber Macroeconomic Research Center, estimates this share at around 39% of GDP, close to the OECD average of 42.6% in 2023.

Budget growth outpaces OECD increase

Before Russia’s large-scale invasion of Ukraine, in 2018-2019, the budget accounted for about a third of GDP. By 2025, this share is projected to have risen by over 6 percentage points, compared to a 2.4 percentage point increase in OECD countries between 2018 and 2023. This growth has reduced the gap between Russia and OECD nations significantly.

Risks of exceeding 40% budget threshold

Isakov warns that reaching a 40% budget share could hinder economic growth by burdening businesses and reducing the tax base. He notes that Russian companies are delaying investments due to fiscal uncertainty, which limits demand and the government’s ability to collect taxes. These concerns are linked to recent tax increases aimed at funding rising public spending.

Defense spending drives budget growth

The expansion of Russia’s public sector is largely driven by defense spending, which is expected to reach 32% of the budget by 2027. This would make military expenditures exceed 10% of GDP for the first time since the Soviet era, reaching about 182 billion euros in 2027.

OECD countries spend more on social programs

In OECD countries, a larger share of GDP is devoted to social protection, health, and education compared to Russia. These areas account for about 27% of GDP in OECD nations and 31% in European Union countries, while Russia spends about 19% on these areas. This difference highlights varying priorities in public spending across regions.