Russian sanctions on Turkey to have limited effect: EBRD

The effect of sanctions imposed on Turkey by Russia will be limited, the European Bank for Reconstruction and Development (EBRD) said on Dec. 7.

The Russian sanctions were imposed after a fighter jet which had violated Turkish airspace was shot down on Nov. 24. Moscow later announced it was a Russian aircraft.

The measures imposed ranged from restricting visa-free travel to a ban on imports of certain foodstuffs and a ban on the sale of Turkish holiday packages to Russians by tourist agencies.

"The sanctions may reduce Turkey's GDP growth in 2016 by around 0.3-0.7 percentage points, if they remain in force over the next year and are fully applied, with most of the impact related to tourism occurring around the mid-year," the bank said in a statement.

However the bank pointed out there were risks for both the Turkish and Russian economies, as the two countries had strong economic ties in energy, food, tourism and construction projects.

"Deteriorating economic ties are likely to have a non-negligible, but not major, impact on Turkey's GDP," the bank said. But the bank warned increased friction between the two countries could lead to a disruption of Turkey's energy supply.

"However, at this stage, a disruption to the energy supply seems highly unlikely," the bank said. "However, a further escalation of the sanctions cannot be ruled out, in which case Turkey's country risk premium and cost of funding could rise, causing a larger-than-estimated impact."

The bank added the Russian economy also couldn't pass through this crisis unscathed, as the sanctions may put upward pressure on import prices and inflation in Russia, adding an additional 0.1-0.2 percentage points through more expensive vegetable and fruit...