According to the “Construction sector in Russia 2009 – Development forecasts for 2009-2012” report recently published by PMR, a research and consulting company, the situation on the Russian construction market began to deteriorate in the second half of 2008 and the slowdown deepened towards the end of the year. Yet thanks to healthy growth figures posted in H1, growth figures for the entire year remained strong. “Without the buffer of a strong first six months, 2009 has witnessed a fully fledged construction crisis, with output, employment and other key indicators for the industry falling sharply.”, according to Robert Obetkon, a Senior Construction Analyst at PMR and the author of the report. In rouble terms and at the time of publication, the Russian construction industry contracted by 18.4% in the first three quarters of 2009. In dollar terms, however, and due to the depreciation of the rouble, the value of the industry plummeted to just $81bn for the period Q1-Q3 2009 – down from $129bn in the same period one year earlier.
Residential construction figures indicate that this segment has thus far not been dramatically affected by the economic crisis. After a 6.5% growth last year, the number of housing units built in Russia underwent a slight decrease during the first nine months of the year. The total floor space of apartments completed (up 4.6% last year) fell by 0.6% in Q1-Q3 2009. However, the decline in housing construction levels is expected to intensify in the upcoming months as hardly any new residential projects are being commenced.
“While residential and non-residential construction activity will remain relatively subdued at least for the next year due to ongoing difficulties in securing financing, most construction contracts will be related to infrastructure development projects.”, says Robert Obetkon. These will serve to boost the overall level of construction activity in the country.
Increased capital expenditure on road and railway construction, as well as airport expansion, will be driven by the federal programme aimed at modernising the country's transport system between 2010 and 2015. This programme will require a total investment of $420bn, of which $147bn will be sourced from the federal coffers. Assuming a conservative scenario whereby only 10% of the programme will be implemented, this will equate to a $7bn annual boost in construction activity each year through to 2015. With the federal budget deficit expected to be 3-7% of GDP over the next three years, much of the funding for Russia's infrastructure projects will have to be provided by private investors through schemes such as public-private partnerships and other non-budgetary sources, which will thus increase in importance.
This press release is based on information contained in the latest PMR report entitled “Construction sector in Russia 2009 – Development forecasts for 2009-2012”
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