Although Russia appears to be on the right track to emerge from a recession, the economy isn’t set for a full recovery until 2012. The performance of the single-country exchange traded fund (ETF), however, reflects a definite rebound since earlier this year.
Because of the Russian economy’s dependence on oil, the economy there has been hit harder than those of most other emerging markets. Natalia Vasilyeva for the Associated Press reports that analysts warn that while a recovery is in the works, investors should expect growth to be slow and cautious at best.
Russia’s gross domestic output rose 7.4% in the April-June period compared to the first quarter, although it is still down 10.9% compared to a year ago. The government is going to borrow from abroad this year to cover the deficit, as reserves are dwindling and banks are threatened by rising bad debt.
Vitaly Klintsov, Irene Shvakman, and Yermolai Solzhenitsyn for McKinsey Quarterly reports that the days of easy expansion and growth are gone, and that the country needs to broaden its horizons beyond the old standbys on which it relied for growth (namely, oil). Russia must grow by making better use of labor and capital resources, or, in other words, encouraging higher productivity. This is paramount, because Russia’s labor force could shrink by as much as 10 million people by 2020.
- Market Vectors Russia (NYSEArca: RSX): up 107% year-to-date
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.