Full-fledged Russian recovery expected in 2011

By Helen Wright17 November 2010

After a faltering start to 2010, the Russian construction industry will show signs of growth in the last quarter and a "full-fledged recovery" will come about next year.

This is the message from specialist information provider PMR in its latest update, Construction Sector in Russia - Development Forecasts for 2010-2013.

According to the report, the Russian construction market contracted by -0.8% over the first nine months of 2010 - a reduction which the analyst brands "remarkably healthy" when set against the -18.4% slump recorded in 2009.

"Growth is likely to resume in the Russian construction industry in the next few months, with full-fledged recovery expected in 2011," the report stated.

"Construction firms are now much more optimistic about the future than they were just a few months ago. The most successful of them have concluded contracts worth billions of dollars and are planning to take on employees and purchase new building machinery," the report added.

But PMR was cautiously optimistic, highlighting that while a tentative recovery has begun, the Russian construction industry is very dependent on support from the government, which is currently facing a deficit after years of operating on a substantial federal budget surplus.

"Russia's federal budget has not emerged unscathed from the global economic downturn... the deficit will hamper the government's ability to fund projects other than those which are considered the most crucial," the analyst explained in the report.

The scaling back of government projects will, in turn, likely lead to more public-private-partnerships (PPPs).

PMR noted that a number of concession projects have already been awarded, including the US$ 2 billion first section of the Moscow-St. Petersburg motorway, the US$ 1.8 billion development of Pulkovo Airport and the US$ 720 million Odintsovo Bypass.

Civil engineering and residential construction projects will drive growth, while the non-residential sector is likely to remain "relatively subdued", according to the report.

In civil engineering, the most extensive ongoing projects are those which involve preparations for the 2014 Winter Olympics in Sochi, the 2012 Asia Pacific Economic Cooperation Summit in Vladivostok and 2013 sports event, the world university games, or Universiade, in Kazan.

For the Sochi projects alone, the Russian government has allocated US$ 17.5 billion in the federal budget for the period 2011-2013, according to the report.

And improving economic conditions are also boosting the credit supply to the Russian construction industry. PMR figures show that between January and early September 2010, the amount of money loaned for construction purposes increased tenfold, to US$ 16.7 billion.

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