Morgan Stanley has a short message for Russia: you're doomed. This past week hasn't been easy for the Russian economy: on Thursday, the EU foreign ministers decided to extend the sanctions on Russia by 6 months. Additionally, the Central Bank slashed interest rates to 15% down from 17% after the economy deteriorated following the rate hike in December. But Morgan Stanley is forecasting a pretty scary forecast for the future too. "We downgrade 2015 growth from -1.7%Y to -5.6%Y and revise our 2016 growth from a mild (0.8%Y) recovery to a 2.5%Y recession," writes Morgan Stanley's Alina Slyusarchuk. "The key new assumption that triggers the revision is the signifcantly weaker oil price, combined with a tighter policy response. At the same time, we see risks to our call as being titled to the downside, given the enhanced risk of further sanctions, and concerns over increased state control over the economy." Unless there's a rebound in oil prices or western-imposed sanction, Morgan Stanley highlights three risks: "We see the implementation risk that 'top-down' stabilization is undermined by special deals to help particular banks and companies" — weakening the ruble and driving inflation. Further potential sanctions on Russia "might trigger rating downgrades and index exclusion, which would drive another wave of capital outflows" — again weakening the ruble and driving inflation. The government might finally introduce capital controls. Now here's the scariest part of the latest Morgan Stanley report: Although initially analysts and Russian politicians alike were likening the current economic crisis in Russia to that of 2009, the latest Morgan Stanley note suggests this one is could be much more severe. "Looking ahead, barring a strong rebound in oil prices or the lifting of sanctions, we see the recession lasting much longer through 2016, unlike the V-Shaped rebound in 2009, particularly given the rising risk of further sanctions," Slyusarchuk writes. Welp. It's not looking good.SEE ALSO: Greece Is Quickly Turning Into Europe's Worst Nightmare Join the conversation about this story »
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