Russia To See New Construction by Mid-2010
MOSCOW-The construction market has declined in value throughout 2009; now worth $81 billion, it was valued at $129 billion at the start of Q1.
By Katie Hinderer | October 29, 2009 at 09:04 PM
MOSCOW-The Russian construction industry has been heavily hit by the global economic downturn, as is evident by the suspended projects and virtually no new construction on both the residential and commercial side. But there is light at the end of the tunnel, according to a recent report put out by Robert Obetkon, Senior Construction Analyst for PMR. The report is entitled 'Construction Sector in Russia 2009 – Development Forecasts for 2009-2010.'
"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," Obetkon says.
Russia's construction market began to lag during the second half of 2008, with the more serious decline taking place at year's end. The market contracted 18.4% during the first three quarters of 2009. The market, thanks also in part to the falling value of the rouble, declined from a value of $129 billion at the start of 2009 to today's $81 billion.
Still Obetkon sees signs of life. "Despite this though, it seems that the worst of the storm has passed and market stability should return in 2010, with the promise of growth in 2011."
What will most helpful to bolstering the economy in 2010 is infrastructure projects. "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.", Obetkon says.
The country already has in place a $420 billion plan to improve the means of transportation, including the roads, railways and airport expansion. The program will begin next year and is likely to last through 2015. Even if all the plans do not move forward the boost to the economy will be significant.
"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," Obetkon says.
The country is also looking toward the $1.2 billion reconstruction of the Sayano-Shushenskaya Hydroelectric Power Plant and other nuclear power plants in the area to provide economic stimulus. And lastly, Obetkon points out the 2014 Winter Olympics, which will be held in Sochi will help push construction along.
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