Russia Predicts 2015 Recession

Russia is predicting it will slide into a recession next year.

Moscow's economic development ministry said Tuesday it is forecasting the Russian economy will contract eight-tenths of a percent in 2015, down from an earlier projection of a 1.2 percent advance.

Russia's economic fortunes are being buffeted by falling revenues on oil exports, the backbone of the state budget, and Western sanctions linked to Russia's intervention in Ukraine.

The sanctions are hurting Russian banks and investment in the country is falling, while the value of the Russian currency, the ruble, against the U.S. dollar has dropped by more than 40 percent this year.

The economic ministry said that its earlier, more robust prediction assumed that the sanctions imposed by the United States and European countries would be lifted next year, but said the new projection assumes "continuing strong geopolitical risks." The forecast sees more "capital flight" from Russia, a drop of $125 billion in investment instead of the earlier $100-billion estimate.

Russia's economy has been particularly hard hit by falling oil revenues, with the price of crude oil on world markets dropping by a third since June to $70 a barrel or lower.

With the fall in the value of the ruble, inflation in Russia has accelerated, and could hit 9 percent in the coming weeks. The economic ministry estimated that the real incomes of Russians will diminish by 2.8 percent next year instead of the earlier prediction of a gain of four-tenths of a percent.

The decline in the Russian economy is in line with gloomier prospects throughout the world, except in the United States, where the world's largest economy is showing marked improvement. Europe's 18-nation euro currency bloc, collectively the world's largest economy, is near a recession, while China's economy is slowing and the Japanese economy already is in a recession.

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Major Banks to Lay Off Staff Amid Recession

Major banks are planning to lay off staff early next year.

Industry insiders say KB Kookmin Bank will soon offer voluntary retirement packages to its employees. Woori Bank also mulls similar measures.

As banks have seen their profits tumble recently, they are more likely to reduce the number of new hires.

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Japan's PM Calls for New Elections to Deal with Recession

Japanese Prime Minister Shinzo Abe is dissolving his government, calling for new elections to secure public support for more economic reforms to stimulate growth. The moves come after news that Japan's economy unexpectedly fell into recession.

Abe announced that Japan's lower house of parliament will be dissolved on Friday, November 21, setting up national elections for sometime in December. His announcement also delays a planned sales tax hike that was expected to take effect next October, but now likely will be delayed for 18 months.

Abe hopes to win a strong popular mandate in the upcoming elections to pursue his core pro-growth polices known as "Abenomics." He said Tuesday that if his administration is returned to power, he will not postpone the tax hike again.

Abe came to power in December 2012 with a plan to revitalize the world's third largest economy.?The conservative leader promised to stimulate growth by increasing government spending, keeping interest rates low and easing regulations. And to a certain extent his policies worked. Stock prices and employment increased.
Under pressure from deficient hawks, however -- some within his own party -- he also increased the sales or consumption tax rate last April to bring down Japan's public debt, which is more than twice its gross domestic product.
Masazumi Wakatabe a Professor of Economics at Waseda University in Tokyo attributes the sudden recession in Japan to the recent tax hike.
"So after the current consumption tax hike on April, the consumption figures have been very stagnating, and also other investment figures have been also not picking up. So that's the reason I think because consumption and investment compiles [accounts for] almost 80 percent of Japan's GDP," said Wakatabe.

Japan's Prime Minister Shinzo Abe waits to meet China's President Xi Jinping, during their meeting at the Great Hall of the People, on the sidelines of the Asia Pacific Economic Cooperation meetings, in Beijing on Nov. 10, 2014. /AP

The slowdown in Japan comes at the same time that China's growth is slowing as the government there tries to make the economy more driven by domestic consumption and less by exports and investment.
A slowdown in Japan's imports likely will negatively impact the rest of Asia to an extent. Asian stock markets traded lower right after the news broke that Japan was in a recession.
Europe's economy has been stagnant as well. British Prime Minister David Cameron recently warned of a looming second global crash. Writing in a British newspaper he said, "The Eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too."
And while the British economy is growing, Cameron said, "Wider problems in the global economy pose a real risk to our recovery at home."

Professor Wakatabe said Japan's recession, by itself, is not likely to cause the world markets to crash. "I don't that this slowing down of growth in Japan will spark the global financial meltdown or anything. Japan is important, but Japan is not that important or I don't think that's going to happen," he said.
Although the United States continues to experience positive growth, the weaker global outlook could be a concern if domestic consumption declines.
While Japan's economic woes may not cause the global system to collapse, Wakatabe said it likely will not be a dynamic force for growth either, at least in the short term.

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Major Banks to Lay Off Staff Amid Recession

Major banks are planning to lay off staff early next year.

Industry insiders say KB Kookmin Bank will soon offer voluntary retirement packages to its employees. Woori Bank also mulls similar measures.

As banks have seen their profits tumble recently, they are more likely to reduce the number of new hires.

View the original article here