Defense Spending Soars to 6% of GDP
Expected to Increase to About 11 Trillion Rubles
Only 2.7% of GDP in 2021
Russia's defense budget has skyrocketed since the invasion of Ukraine, and it is projected to increase to 6% of the country's Gross Domestic Product (GDP) next year. Expenditures under confidential and unspecified categories are expected to nearly double.
On the 22nd (local time), Bloomberg News reported that after obtaining and analyzing a draft of Russia's budget plan, the defense budget is expected to rise to 6% of GDP next year. Russia's defense spending as a percentage of GDP was 2.7% in 2021 before the invasion of Ukraine, but it rose to 3.9% this year.
Moreover, with the presidential election scheduled for March next year and ongoing international sanctions targeting Russia, the defense budget is expected to surpass social welfare spending.
Bloomberg explained that changes in the Russian government budget reflect shifting priorities due to the endless war causing massive fiscal losses.
According to Bloomberg, Russia's total budget for next year is set at 36.6 trillion rubles (approximately 508 trillion won), a 15% increase from this year. The defense budget is expected to increase from 6.5 trillion rubles this year to 10.8 trillion rubles (150 trillion won) next year. This is about three times the 3.6 trillion rubles spent in 2021, just before the invasion of Ukraine.
Secret expenditures under confidential or unspecified categories will rise from 6.5 trillion rubles this year to 11.1 trillion rubles (154 trillion won) next year. This is expected to double compared to 2021. It is analyzed that the increase in secret spending is intended to avoid investigations into the consequences of the war.
Spending on social policies will increase from 6.5 trillion rubles this year to 7.5 trillion rubles (104 trillion won) next year, but this is more than 3 trillion rubles (42 trillion won) less than the defense budget.
However, despite unprecedented international sanctions, the Russian government estimates it will collect 35 trillion rubles (486 trillion won) in revenue next year, 22% more than this year. The fiscal deficit is expected to continue decreasing from 1.8% of GDP this year to 0.9% next year and 0.4% the year after.
Oil and gas revenues are also expected to increase by about 25% next year, reaching 11.5 trillion rubles (160 trillion won). In particular, the average price of crude oil, a major source of income, is projected to rise from $63.4 per barrel this year to $71.3 per barrel next year.
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