The Russian government can’t seem to agree about the economy there, which means it’s anyone’s guess which way the exchange traded fund (ETF) will go.
Some policymakers say the economy is overheating, citing the 8.1% growth rate, report Darya Korunskaya and Yelena Fabrichnaya for the Guardian. The economy minister said Russia needed still more growth, saying the price of a slowdown was too high.
The debate mostly centers around whether a tax cut is needed to boost growth. Opponents see it as a move that would cost the state budget the equivalent of one year’s defense spending. Both President Vladimir Putin and president-elect Dmitry Medvedev are in favor of the cuts.
Those in favor of the cuts say Russia needs growth of 7%-8% over the next few years if it wants to realize Putin’s goal of doubling the country’s gross domestic product.
Wherever Russia lands on the tax cut issue, the move could affect Market Vectors Russia (RSX). The fund is down 5.3% year-to-date, but is up less than 1% in trading today.
Meanwhile, Putin and Bush have sat down negotiating a strategic framework for relations for both nations, even once both presidents have left office. The missile defense deal assures the Russians the European military threat is not aimed at them, reports Robert Burns for Associated Press. Apparently suspicions and old fears regarding missile defense are still a factor, so both presidents must work together to resolve this.
A key pledge is that the United States won’t activate new sites in Poland and the Czech Republic unless Iran proves to be an imminent threat to Europe.
For full disclosure, some of Tom Lydon’s clients own shares of RSX.