‘We really are in a perfect storm’

At an event on the sidelines of the St. Petersburg International Economic Forum, Russian Finance Minister Anton Siluanov made a telling remark. In his words, the country’s federal budget, which has posted a deficit in the first part of the year, is weathering “serious turbulence.” The comment came in response to Sberbank CEO Herman Gref, who described Russia’s economic climate as a “perfect storm.” Rather than pushing back, Siluanov agreed — going so far as to acknowledge that Russia’s fiscal and monetary policy are out of sync.

Russia’s Finance Minister Anton Siluanov said the government has no plans to introduce further changes to the country’s tax system, even as the federal budget is, his words, going through “serious turbulence.” He made the remarks at a Sberbank-hosted business breakfast on the sidelines of the St. Petersburg International Economic Forum (SPIEF) on Friday.

Opening the event, Sberbank CEO Herman Gref called the current economic climate a “perfect storm,” citing the high key interest rate’s impact on business profitability and Russia’s lagging productivity compared to developed countries.

“We really are in a storm — a perfect one, as you said,” Siluanov responded. “And the budget is no exception; it’s experiencing serious turbulence. Still, we discussed taxes last year and agreed not to touch the basic structure. That was the right decision — taxes are also an important tool for ensuring predictability in our policy.”

Siluanov outlined several measures he said would help maintain financial stability. First, he said, the government should “be more modest in its ambitions.” He also stressed the need to better coordinate fiscal and monetary policy. “What we’re seeing now is, to some extent, the result of a lack of coordination,” he said.

The finance minister also warned that the federal budget should avoid taking on too many “unpredictable risks.” “In some areas, the state has taken on the full burden of interest rate risk. That’s not how it should work,” he said.

Gref, for his part, pointed to the strengthening ruble as a factor contributing to the growing budget deficit. “We’re seeing the budget run into a significant shortfall, and by year’s end, it’s clear the Finance Ministry will need to turn to new sources of funding — most likely, market borrowing,” he said.

According to preliminary data from the Russian Finance Ministry, the federal budget ran a deficit of 3.393 trillion rubles (roughly $43.2 billion), about 1.5 percent of GDP, between January and May 2025.

At the start of the year, Russia introduced a five-tier progressive personal income tax system. Previously, there were just two brackets: 13 percent and 15 percent. The new system includes five rates — 13, 15, 18, 20, and 22 percent — based on income bracket. Officials have described the change as a move toward “social justice.” According to the Finance Ministry, the new structure affects about two million of the country’s 64 million personal income taxpayers, or roughly 3.2 percent of the workforce.