Russia

Russia’s total natural resources are valued at $75tr by the World Bank. Over 30pc of the world’s natural resources are estimated to be in Russia.

Market reforms in the 1990s privatised majority of the state enterprises except for the energy and defense-related sectors. Russia became the largest borrower of IMF loans by borrowing $20bn to support radical reforms during that period.

Russia bounced back from the August 1998 financial crash quite rapidly.

During 2000-02, significant amount of pro-growth economic reforms including a comprehensive tax reform which improved the situation for small and medium-sized enterprises.

Russia’s has been in recession for nearly two years as oil prices have slumped and western sanctions imposed in protest at the Russian intervention in Ukraine have bitten hard.

The economy contracted by 3.7pc in 2015. The combination of falling oil prices and sanctions hit the coutnry hard, causing capital flight. The IMF is of the view that the steps Russia took to mitigate the crisis had helped lessen the impact of recession.

The pace of the recession has now declined substantially. Real GDP shrank by just 0.9pc in the first-half of 2016. With oil prices recovery, the economy is expected to bottom out in the second half.

The EU has recently extended sanctions against Russia for its actions in Ukraine, targeting specific sectors of the economy, with an expected deline on real GDP of 1.2pc. The IMF expects the economy to return to growth in 2017 when GDP could expand by 1pc.

According to the World Bank, Russia’s economic outlook has improved and is set to return to growth as soon as next year. Its GDP will contract by 0.6pc this year but will grow by 1.5pc in 2017 and 1.7pc 2018.

The Bank of America’s report reveals that Russia is expected to drive a modest 1.1pc recovery next year supported by domestic demand. But western sanctions over the Ukraine conflict could complicate Russia’s economic recovery. Another potential problem lies in Russia’s depleting fiscal reserves.

The fiscal deficit worsened in 2016. According to Russia’s finance ministry data, the reserves shrank by 64pc from $88bn in January 2015 down to $31.7bn in November 2016. These are expected to decrease from 7pc to 3.1pc of GDP at the end of 2019.

The draft budget for 2017-19 implies that the federal budget deficit will amount to $43.7bn in 2017, increasing fiscal sustainability risks, according to the World Bank.

Turkey

Turkey as a free-market economy has performed well since 2000, in a backdrop of macroeconomic and fiscal stability, making it an upper-middle-income country.

Since 2012, growth has slowed and annual per-capita income stagnated around $9,000. Unemployment increased and reform momentum became uneven. Slow growth in Europe and a deteriorating geopolitical environment in its neighbours have negatively impacted the country’s exports, investment, and growth.

The influx of 3m Syrian refugees in 2015-16 created new social, economic, and political demands, particularly in urban centres where most refugees are living.

Elections in June and November 2015, a cabinet reshuffle in May 2016, an attempted coup in July and the consequent replacement of public officials affected the government’s reform momentum. A series of terrorist attacks weakened tourist arrivals and foreign investment. Delay in private investments led to slower economic growth.

According to the OECD, GDP growth is estimated to have slowed to under 3pc in 2016, but projected to pick up gradually to around 3.75pc by 2018.

In the first-half of 2016, the economy decelerated against the backdrop of political unrest and rising geopolitical conflicts. Following a revised 4.7pc increase in the first-quarter, GDP expanded 3.1pc annually in the second-quarter, the slowest increase since 2015 first-quarter.

Private consumption expanded 6.8pc in the second-quarter, reflecting a slowdown compared to the 7.6pc increase seen in the first-quarter. Fixed investment in the second-quarter contracted 0.6pc while a more supportive fiscal stance forced the government spending to increase 15.9pc in the second-quarter, up from the 10.9pc in the first-quarter, the fastest rise since 2009 fourth-quarter.

However, the government expects the economy to expand 5pc in 2017. FocusEconomics panelists see GDP growing by 3pc in 2017.

Turkey’s credit growth has slowed significantly. For 2017, a discretionary expansion of about 0.5pc in GDP would support domestic demand without contributing significantly to external imbalances.

The central government’s budget gap will reach 1.7pc of GDP in 2017, but the government aims at reducing it to 1pc in 2018.

Restoration of relations between Ankara and Moscow could have a positive impact on the Turkish economy by mid-2017 as Russia is an important market for the export of fruit and tourism in Turkey.

Published in Dawn, Business & Finance weekly, January 2nd, 2017, 2016