Time to read: 13 minutes(s)

Tatiana Rybakova

At the end of the year, it's traditional to summarize the results and make forecasts. We've decided to follow this tradition, but with a slight twist: let's look at which regions will get richer and which will get poorer next year.

The next year is expected to be challenging for the Russian economy: a growing budget deficit, falling oil and gas revenues, and attempts to replace them with a rising tax burden, which, in turn, is exacerbating the situation for the civilian sector, already suffering from expensive loans and challenging business conditions. However, even in a troubled family, everyone suffers differently. Russia's regions may also fare better or worse next year, depending on their specific circumstances. This article is an attempt to compile an economic forecast from a regional perspective.

The overall picture

Russia is becoming a country with a perpetual budget deficit, according to the government's budget forecast until 2042. The reason is that oil and gas revenues will steadily decline relative to GDP (by 43% over the entire period compared to 2019), and non-oil revenues (read: taxes and quasi-tax payments and fees), although expected to grow by 139% of GDP (and VAT by a full 159%), are unlikely to be able to replace oil revenues in real terms: simply because the new tax burden will become unbearable for a wide range of businesses.

The problem is compounded by the fact that Russia's debt is mostly domestic. On the one hand, it is quite easy to force banks (especially state-owned banks) to buy all new issues of OFZs. Especially if you guarantee them assistance in a crisis situation. On the other hand, this debt is expensive: both literally—due to the high Central Bank interest rate, it is forced to provide a return—and figuratively—the government essentially takes on the borrower's insurance, which carries considerable risks in the event of a simultaneous deterioration in their solvency, for example, in the event of a crisis. Bloomberg calculated that even if the war ends, Russia will have to pay off these debts for many years to come, and at a steep price: this year alone, the government issued 7,9 trillion rubles in OFZ debt, exceeding the 2020 record.

In many ways, this is the result of that very “structural transformation of the economy,” which required two drastic maneuvers at once: shifting the main foreign trade routes to the east (which meant changing logistics, financial flows, and even ways of doing business) and moving from a consumer economy to a mobilization economy. Moreover, even here the end of the war does not promise relief. Changing the same logistics again is not an option: firstly, it will again cause numerous disruptions, and secondly, it is not at all a fact that Western countries will simply return to business as usual. As for a return to a consumer economy, it looks even less achievable: the world is clearly entering a phase of a new “cold war”. This can be seen not only in the example of Europe, which is increasing military spending, but also in Donald Trump's new military doctrine, which provides, in particular, for the creation of the "Golden Dome" program, which is very similar to Ronald Reagan's SDI program in the mid-80s. Add to this the need to replenish stockpiles of traditional weapons used up during the war, as well as to launch production of new types of weapons, primarily drones and anti-drone systems, and it becomes clear: the mobilization economy is here to stay. Moreover, many in power find managing this type of economy both familiar and more convenient: the command style has never disappeared from Russian politics.

Based on the assumption that these trends will continue next year, let's try to look at how this will affect the economies of individual regions. Fortunately, the problems with filling regional budgets have already been discussed in a friendly publication. We will use the Ministry of Economic Development's regional forecast for 2025–2027 and Russian media publications analyzing the budget deficits of regional economies (here, here, and here) as our materials, adding additional information as we go.

Beneficiaries of war

Let's start with the good news - well, regarding regional economies. It is clear that in the context of an arms race, regions with a developed defense industry and stable government contracts will benefit. From this point of view, the best chances to improve the economic situation are in Udmurtia, Kurgan and Kaluga regions. According to the Ministry of Economic Development, Kaluga Oblast and Udmurtia are also leading this year in terms of growth in their gross regional product (GRP) – 7,7% and 5,7%, respectively. This, of course, is not 20,8% of Chukotka, but Chukotka earned money primarily from large investments in new production projects (for example, Vostok Oil) and the development of ports, which we will discuss later.

Udmurtia (GRP growth forecast for 2026: 3,4%) is a Russian center for small arms and missile production. It is here that the Kalashnikov concern (small arms) and the Izhevsk Electromechanical Plant Kupol, which is part of the Almaz-Antey concern (which produces, among other things, the Tor air defense missile system), are located. The Kurgan region (with a projected GRP growth rate of 5,8%) is home to Kurganmashzavod, Russia's only manufacturer of infantry fighting vehicles, which have proven themselves far superior to tanks in the current war.

It is obvious that the products of these enterprises will be in demand even if the hostilities end, and certainly if they continue. Guaranteed product sales and uninterrupted funding from the federal budget help preserve jobs (meaning no burden on regional budgets in the form of benefits) and ensure stable tax revenues—including for regional budgets, which receive corporate income tax and VAT (without the additional 2% from next year). Among the risks are attacks by Ukrainian drones: military factories are legitimate targets during military operations, but so far, judging by available information, they do not cause irreparable damage to targets. The situation may change if Ukraine acquires long-range missiles.

The Kaluga region stands out somewhat (GRP forecast: 4,2%). It's worth noting the region's leadership's active efforts to restart the auto cluster after the departure of Western automakers due to the outbreak of war: the PSMA Rus plant (formerly PSA Peugeot Citroën) began assembling Chinese Haval M6 and Citroën C5 Aircross vehicles, and the company also began producing cars under the Tenet brand. There are plans to collaborate with other Chinese brands, as the main focus is on Chinese brands taking the place of the departed VW and Skoda. Plus, the development of a pharmaceutical cluster within the framework of import substitution of medicines and our own developments in the field of nuclear medicine and the production of medical products. The almost forced migration of Russians to domestically produced cars, despite the fact that AvtoVAZ products are not in demand even under these conditions, creates a chance for good demand for localized "Chinese" products—especially since Kaluga automakers have a strong assembly culture. The same is true for pharmaceuticals: the government is striving to completely replace imported drugs and equipment, so demand for Kaluga products is ensured, including through government procurement. This means that the regional budget will also feel good.

New paths

The next group of regions received preferences due to the “pivot to the East” and the development of new business areas.

For example, the Amur Region is the absolute leader in the Ministry of Economic Development's forecasts, with GRP growth in 2026 reaching 7,7%. First of all, the development of logistics routes to China plays a role here. The Blagoveshchensk-Heihe Bridge makes the region a key hub for trade with China. It is not surprising that not only Russian but also Chinese investments are being directed here: into large warehouse complexes and into the development of the Amurskaya priority development area infrastructure. The transformation of the region into a transport corridor between China and Russia promises a constant influx of funds and, consequently, revenue for the regional budget.

Add to this the Amur Gas Processing Plant, owned by Gazprom. Yes, gas exports are currently difficult, but gas processing at the plant produces helium, which is in demand on the global market (delivered to the helium hub in Vladivostok), and in the future, polypropylene production, as well as the supply of raw materials to SIBUR's ethylene and polyethylene plant under construction.

Another potentially profitable facility is the Vostochny Cosmodrome. Yes, its construction was accompanied by corruption scandals, and completion next year is not certain, but the launch platform accident at Baikonur simply leaves no other choice but to use Vostochny to launch Soyuz spacecraft.

The Ministry of Economic Development forecasts a more modest GRP growth for Chukotka next year than this year—5,4%—but it is quite possible that the forecast will be exceeded. The fact is that the main growth factor will be the development of the Baimskaya ore zone, with its significant reserves of copper, gold, and silver—these metals are currently rapidly rising in price on the global market and are predicted to rise further next year.

These beneficiaries are probably the only ones whose risks are minimal. Even if all sanctions against Russia are lifted, cooperation with China is unlikely to cease; rather, it will only expand, including to other countries in the Pacific region. Even if the price of gold and silver falls, copper promises long-term and stable growth—it is indispensable amid the growing trend toward electric vehicles, AI data center construction, and green energy.

Finally, there are regions that are beneficiaries of Russian and European policies based on the principle of “every cloud has a silver lining.” Russia's 2014 "counter-sanctions," imposed in response to Western sanctions following the annexation of Crimea, led to a significant boost in the agricultural sector. Since then, powerful production clusters have developed in the agro-industrial complex, ensuring not only the export of agricultural products, but also the full cycle of growing and processing products for the domestic market. Difficulties with traveling to foreign resorts due to visas and high flight costs have led to the development of domestic tourism—incidentally, officials and politicians barred from traveling abroad due to sanctions and internal restrictions have also contributed significantly to this.

The beneficiaries of this type primarily include Adygea (GRP growth forecast: 6,5%) and Krasnodar Krai (GRP growth forecast: 2,6%). Food production is rapidly developing in Adygea, and construction of the all-season resort "Lagonaki" is planned to begin next year. As for the Krasnodar Territory, it is not only a leader in the production and processing of agricultural products, but also a leader in the growth of real estate values, built in anticipation of increasing tourist flow.

However, it is worth noting that the beneficiaries of this cluster also have their own specific risks. For example, the Ministry of Agriculture's strict policy of completely replacing foreign agricultural products (including seeds and breeding material) could play a cruel joke on farmers—Russian seeds and breeding animals, as well as embryonated eggs, are of much lower quality. In addition, the expansion of exports is currently going mainly to the so-called countries. "Global South," which often means working on credit and all sorts of cashless schemes that reduce profitability. Finally, work to meet domestic demand, even in such sought-after sectors as the food industry and tourism, could suffer from the inevitable decline in consumer activity—and this is already being observed.

Burnt coal

Let's move on to the regions with the greatest economic risks next year. And here the undisputed “leaders” are the coal-mining regions. After the war began, they suffered a double blow: first, they lost the profitable European market (and in the eastern direction, coal miners had to literally fight with oil workers for the right to travel along the Trans-Siberian Railway), and then world coal prices fell.

The Kemerovo region appears to be the hardest hit here: in 2026, a drop in GRP to minus 4,1% is predicted. The budget deficit is critical – about 44 billion rubles: revenues 234 billion, expenses 257 billion rubles. Next year, a further drop in revenue to 198–194 billion rubles is predicted due to the ongoing crisis in the coal industry. As a result, many regional programs had to be significantly cut, but the expenditure side still ended up with an increased deficit of 215–210 billion rubles. Kuzbass mines are closing, and non-payment of wages is becoming commonplace. There is an idea to build a ski resort with the help of Sber, but so far it doesn’t look like a solution. The only thing Kemerovo residents are hoping for is the Tsivilev family's close ties to the region: Sergei Tsivilev moved from the governor's seat to the Minister of Energy, and his wife, Anna Tsivileva, Putin's second cousin, holds the post of Deputy Minister of Defense. The family owns the Kolmar coal company, and Kemerovo residents hope that the federal government will save more than just its mines.

Khakassia is also suffering from the coal mining crisis, but there are no Putin relatives there. The region traditionally has weak budget stability, since, in addition to the coal industry, it has industries such as non-ferrous metallurgy that are dependent on global economic conditions. Powerful hydroelectric power plants are owned by the state through RusHydro and are limited in increasing profits: on the one hand, by controlled tariffs, on the other, by lobbying from metallurgists who need cheap electricity to produce aluminum. Nevertheless, even a small increase in GRP within the range of 1,5–2% is currently predicted, but it is obvious that this will depend on federal transfers—the republic is deeply subsidized.

The poor economic situation will also affect metallurgists, and consequently, regions in which the share of metallurgical production in the regional budget is high.

Thus, the Irkutsk region will suffer from stagnation in global prices for aluminum—and coal as well. The budget deficit here is slightly less than that of Kuzbass – more than 40 billion rubles. As long as the Rusal factories located here are in permanent crisis, there is no point in expecting an improvement in the situation. Nevertheless, in October, the regional government approved a forecast for 2026 with GRP growth of 1,5%. It is unlikely that the government itself can know to what extent these plans will come true.

The Vologda region is also under pressure from the global market conditions – on the ferrous metallurgy sector. The problem is exacerbated by the conflict between the eccentric governor, Georgy Filimonov, and Alexey Mordashev, the owner of Severstal, located here. The GRP forecast for next year has not been updated in open sources since 2024, where a slight increase is expected, but the regional budget's income and expenditure balance is unknown.

It is worth noting that the depressive pressure on regions exporting metallurgy is not as critical as in coal regions. Forecasts for metal demand are much more optimistic: metals are experiencing another cyclical crisis, and no one is planning to abandon them, unlike coal. However, next year, several unfavorable factors could converge for these regions: in addition to the weak external market situation, there will also be a decline in domestic demand if the war ends and consumer activity declines.

It’s a different matter with persistently depressed zones and regions with specific risks.

For example, in the Astrakhan region, a 2,1% decline in GRP is projected next year, and the decline will continue until the planning horizon of 2028. The reason is the depletion of existing fields, primarily oil and gas. New deposits require further exploration and are causing protests from environmentalists.

The Kursk region, like the Belgorod region, suffers from its proximity to Ukraine—this used to be a competitive advantage, but now its frontline location offers little hope for investment, while both regions suffer from devastating drone attacks. Increased costs for the restoration of infrastructure and destroyed facilities, the need to accommodate refugees and provide housing for victims, and social tensions all threaten budgetary stability. On the other hand, there is attention from the federal government. Although, as people say, it would be better with money.

The most depressed regions with chronic regional budget deficits are Kalmykia, Mari El, and the Pskov region. They have always survived on federal subsidies. But now the federal budget is cutting payments, and loans to these regions are becoming increasingly reluctant, including from banks. High levels of debt, a lack of interest in the industrial potential of these regions from both the state and private investors, coupled with a reduction in federal subsidies, are creating the grounds for a serious crisis.

In conclusion, it can be said that the saying "a drowning man must save himself" will be more relevant for the regions next year than ever. There's no point in counting on help from the center—it's focusing on the war with Ukraine, given its limited finances. The global economic situation is against it: economic growth is slowing everywhere, including in China. There's no point in expecting increased demand from domestic consumers either—citizens aren't getting any more money, and neither are potential investors. So we'll have to get to work turning lemons into lemonade—as they did in the Kaluga region. This lemonade may not be very sweet, but at least it’s something.