Russia's Economic Growth Slows as VAT Hike and Defense Boost Loom
After three years of conflict in Ukraine, Russia's economic growth is slowing down. The country is now increasing its value-added tax and planning to boost defense spending, as Western sanctions continue to impact its economy.
The Russian government is raising the value-added tax from 20 percent to 22 percent to generate more revenue. This move comes as the country's energy revenues are decreasing and its budget deficit is widening.
Despite these economic challenges, Russia's military spending has remained robust, driven by the ongoing war in Ukraine. This spending has been possible due to the country's ability to circumvent some of the effects of Western sanctions. However, the overall economic impact of these sanctions, as well as the geopolitical situation, is complex and varies.
Notably, the President of the United States, Donald Trump, has taken a strong stance against countries importing Russian oil and advocated for sanctions to weaken Russia's economic position. He recently stated that Russia is in 'great economic distress' due to these factors.
Russia's economic growth is stalling three years into the war in Ukraine. To bolster state coffers, the Ministry of Finance plans to use additional funds mainly for defense and security spending. Meanwhile, the country's energy revenues are plunging, and its budget deficit is widening, despite attempts to raise taxes and mitigate the impact of Western sanctions.
