Will Russia ETF Disprove Bleak World Bank Report?

Russia’s economy and related exchange traded fund (ETF) may be further burdened after the World Bank distributed a bleak report.

In the World Bank’s report on Russia, it is estimated that Russia will have a 4.5% contraction for 2009, a drastic change from its previously projected 3% growth back in November. The financial crisis could ultimately create 5.8 million impoverished Russians, reports Ellen Barry for The New York Times. The Russian government is forecasting a 2.2% contraction in GDP for the year.

The report touches upon the sensitive issue that unemployment would result in civil unrest. There are around 37 million people, one-fourth of the population, who live near poverty. Almost 6.4 million are unemployed and 1.1 million are either working part time or on forced leave. It is thought that unemployment could reach 12% and poverty rates will be at 15.5%.

The report advises Russia to include a package of payments that should increase 70% in unemployment subsidies and 220% in child welfare.

Russia could be in such dire straits because it’s seen as an economy that’s overly dependent on commodities, such as oil.

The World Bank lauded Russia’s anti-crisis program with $85 billion, or 6.7% of its GDP, put into its banking sector, which was able to head off a financial panic.

• Market Vectors Russia ETF (RSX): up 24.6% year-to-date

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Max Chen contributed to this article.

Comments

[Oneslip:]

Once the world realizes that rampant inflation will take place then those commodity rich countries will surely benefit.

Apr 06 11:15 AM

[Geoffrey Lordi:]

Thanks Tom, and Max, for this update. I believe there are a great many folks who don't follow closely enough the emerging markets in which they invest: while such grim news is often characteristic of nascent economies, or ones that have undergone fundamental shifts (but not limited to these), it is often forgotten when it's easy to simply purchase an ETF, forget about the corporate entities (and their interrelationships) that it tracks.

Apr 06 12:46 PM