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Moody's Forecasts Russian Recession Will Extend Into 2016

Moody's Investors Service is forecasting that the deep recession in Russia this year will extend into 2016 as a result of the big drop in commodity prices and currencies caused by China's economic slowdown.

"The recent fall in commodity prices and further depreciation of currencies exacerbate an already unfavorable domestic economic environment," Marie Diron, a senior vice president at Moody's, said on August 28.

"Slower growth in China makes a significant rebound in commodity prices in the near term unlikely. A more prolonged period of low commodity prices will lead to muted export revenues and investment for commodity-exporting G20 economies," she said.

Moody's predicts that Russia's economy will decline by between 0.5 percent and 1.5 percent next year, after falling at rates between 3.6 percent and 4.6 percent this year. Moody's previously said Russian growth would be flat in 2016.

A deceleration of economic growth in China to 6.3 percent next year from levels around 7 percent this year will also prolong a recession in Brazil and cause slower growth in Korea, Japan, and other countries that have extensive trading ties with China, the Wall Street forecaster said.