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Russia’s Industrial Production Contracts Again, RSX Falls 0.49%

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Nov. 20 2020, Updated 3:14 p.m. ET

Low industrial production adds to Russia’s woes

Russia’s woes have only deepened with the Federal State Statistics Service releasing industrial output figures for July. Industrial production in Russia declined by 4.7% in July on a YoY (year-over-year) basis. Consequently, the Russian equity–tracking VanEck Vectors Russia ETF (RSX) was down 0.49% on August 18—on the negative indicator reading. The iShares MSCI Emerging Markets ETF (EEM) has about 3% exposure to Russian equities. It was also down about 1.08%. These funds have yielded 10.32% and -11.48%, respectively, this year.

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Russian industrial production has been hit by Western sanctions

The Russian economy has seen a slowdown over the past year amid a global drop in oil prices. Oil exports are the backbone of the Russian economy. It derives about 50% of its budget revenue from oil and natural gas industry taxes. With the oil price drop, Russian oil firms’ revenue took a hit—like Rosneft (OJSCY), Lukoil (LUKOY), and Open Joint Stock Company Gazprom (OGZPY). Oil prices are still low with no clear sign of a rebound yet.

Currently, Russia is also combating the negative consequences of Western sanctions. They’re depleting export revenue—not to mention the flight of capital from the country.

Key rate down to 11%

In an attempt to revive the reeling economy, the Central Bank of Russia had recently announced yet another rate cut on Friday, July 31. Russia’s key interest rate is now down to 11%. Are the Central Bank’s rate cut decisions enough to stimulate the sinking economy, or does the Russian economy need more?

Stay updated on our latest analysis of the US (SPY)(IVV), Eurozone, and the world (ACWI) macro environments by visiting Market Realist’s Macro ETF Analysis page.

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