TT China continues to suffer from Russia considerable excess capacity in Russia is also slowly recovering from a . . deep recession. Although the economy industrial sectors, such as steel and contracted for its second consecutive year coal, while its financial sector risks in 2016, headwinds are mow teeeding . thanks to a recovery in real wages, have increased. rising oil prices and a related increase in ee oil production. The economy has also received support from both fiscal and Brazil monetary policy, with the central bank Brazil has had its share of hard times in recent cutting the policy rate by 100 basis points last years. After being among the fastest-growing year as inflation moderated. Still, the economy has economies in the world in 2010, it has more likely suffered some permanent damage from the recently suffered its worst recession in a combination of depressed oil prices and Western century, evident in seven consecutive quarters of sanctions, which have pushed down Russia’s long- contraction. In turn, GDP fell an estimated 3.3% run growth potential. last year, leaving it on par with 2010 levels. Even While the cyclical recovery should continue in worse, industrial production now stands where it 2017, it is apt to be measured. The government is did in 2004. planning to reduce the fiscal deficit by 1% of GDP Fortunately, there are already tentative signs this year, which will limit fiscal support. That said, of a recovery. Inflation has peaked; the current elections in March 2018 could ultimately temper account deficit has shrunk; and confidence such fiscal prudence. Meanwhile, the central bank indicators, while still weak, have stabilized. Of will likely deliver more rate cuts, but their size and equal importance, the financial markets have pace will depend on the path of inflation, which welcomed a new government amid expectations could be stickier than anticipated. that it will finally tackle Brazil’s fiscal problems Against this uncertain backdrop, we