Why Russia’s ETF Could See Growth, But Slowly

November 13th at 1:00am by Tom Lydon

ETF russia Russia has finally emerged out of its recessionary slump, but the economy and country-related exchange traded funds (ETFs) may not move onward and upward as quickly as times past.

According to the World Bank, the post-crisis environment in Russia provided the necessary catalyst for reforms when it comes to the country’s structural constraints and weak domestic demand, writes Gleb Bryanski for Reuters. Without reforms, the World Bank believes Russia’s growth will remain sluggish. (Ways to play Russia’s recovery).

Russia’s Central Bank is expected to continue to cut interest rates to ease lending, but the cost of lending still remains high. The Russian Central Bank is trying to dampen the appreciation of the ruble and will soon have to choose “between maintaining a competitive exchange rate for tradable industries and avoiding inflationary pressures,” says the World Bank.

A return of capital inflows to Russia is expected by the first quarter of 2010 as oil prices increase and the global outlook improves. Russia’s inflation rate will range between 9% and 10% in 2010, but stimulus policies may raise it further in the second quarter. The unemployment rates may also rise based on seasonal factors. (Russia’s potential stumbling block).

Prime Minister Vladimir Putin stated said the government will continue to enact measures aimed at boosting domestic demand, strengthening the banking system and decreasing the budget deficit, as stated in BusinessWeek.

According to the Economic Development Ministry, Russia’s GDP is projected to contract 8.5% for 2009. The economy grew 0.6% in the third quarter, signaling an end to their recession.

For more information on Russia, visit our Russia category.