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The Russian government has acknowledged that the country will fall into recession next year, battered by the combination of Western sanctions and a plunge in the price of its oil exports.
The economic development ministry on Tuesday revised its GDP forecast for 2015 from growth of 1.2 percent to a drop of 0.8 percent. Russian households are expected to take a hit, with disposable income seen declining by 2.8 percent against the previously expected 0.4 percent growth. Russia's economic outlook is at the mercy of the global market for oil, a key export that finances the bulk of the state budget. Sanctions over Moscow's role in eastern Ukraine are making things worse, hurting Russian banks and investment sentiment in particular. The national currency, the ruble, has dropped by more than 40 percent this year as the economic troubles mounted. That in turn risks spawning more problems, such as a spike in inflation that would pinch consumers. Russia's economic stability is important for the region. It is a major trading partner for Western Europe, selling raw materials and oil and gas to the West and importing consumer goods and foodstuffs.