Although Russia’s exchange traded fund (ETF) has been climbing upward for the last couple of months, political and economic jitters could be the influence behind it’s recent drop. Currently, the Market Vectors Russia ETF (RSX) is up 9.1% for the last three months, having launched in April.
On Thursday, President Vladimir Putin said that fighting poverty had been the most challenging mission of his eight years in office and offered assurances that the country would not see an economic meltdown when he leaves office next year. However, Putin acknowledged that inflation was a problem and warned that consumer prices could continue to climb, reports Anna Smolchenko for The Moscow Times.
During Putin’s presidency, the country’s oil-driven economic boom has reached the poor. Many Russians are worried that the stability he brought will evaporate once he steps down. Russians also are concerned about inflation and steadily increasing consumer prices. Putin said that the government would not meet its target of 8% inflation for the year and said prices could rise further.
Oil, natural gas, metals and timber account for more than 80% of exports and 32% of government revenues, which leaves the country vulnerable to swings in world commodity prices. However, Russia ended 2006 with its eighth straight year of growth, averaging 6.7% annually since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble initially drove this growth, since 2003, consumer demand and investment have played a big role, according to the CIA World Factbook.
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