The best-performing single country exchange traded fund (ETF) last week was Russia’s. Russia’s economy has shown signs that the recovery is picking up, but the country has some long-term problems that still need to be addressed.

In September, Russia contracted at its slowest monthly pace this year, with an annual economic drop of 4.1% in the third quarter, reports Alex Nicholson for Bloomberg. Total activity index increased to 54 from 52.2, signaling an acceleration in Russia’s recovery.

Despite the growth, Russia has many challenges ahead:

• A negative factor remaining in Russia’s economy is the rate of joblessness. Unemployment stood at 7.8% in August.
• Russia’s political structure has been weakened to the point that a set of independent institutions by a closed elite would rule with little interest in reform, argues Andrew Wood for Business News Europe. Despite dissenting voices, little has been done to galvanize a systematic modernization in Russia.
• The Russian government is hoping that global growth will prop up commodity prices. There is a risk that said growth may not be sufficient to cover Russia’s reserves, and Russia’s failure to expand on domestic production could weaken its resource-based growth model. (Read about Russia’s relationship with oil here).

U.S. Secretary of State Hillary Clinton will visit Russia this week to meet with Foreign Minister Sergei Lavrov and Russian president Dmitry Medvedev, according to Jeff Mason for Reuters. The meeting will go over issues that include:

• Replacement for the Strategic Arms Reduction Treaty
• Plans for a missile shield in Eastern Europe
• A commission that covers arms control, energy, nuclear energy, fighting terrorism and drug trafficking, and aid toward business and science
• Talks regarding Iran and Tehran’s nuclear plans
• Strategy on Afghanistan

• Market Vectors Russia ETF (NYSEArca: RSX): up 131.5% year-to-date; up 13% in the last week

For more information on Russia, visit our Russia category.

Max Chen contributed to this article.

Tags: Eastern Europe, Emerging Markets, Global ETFs, RSX, Russia