Russian construction hit by global financial crisis

The booming Russian construction industry has succumbed to the global credit squeeze and slowed after a significant turn in business confidence in the past weeks according to PMR, a market research organisation specialising in Central and Eastern Europe.

“In the first half of 2008, the Russian construction industry appeared immune from the global squeeze on credit,” said Robert Obetkon of PMR. “However, in the past weeks business confidence has dropped and many developers have frozen projects.

“The first half of 2008 saw construction output increase by +22% to € 49 billion, however stricter and more selective lending, both with regards to project investment and mortgages, means that the second half will see full year growth at a lower rate than in 2007, and we expect even more of a slowdown in 2009,” said Mr Obetkon.

The PMR report ‘Russian construction industry afflicted by the global economy crisis’ details one of the issues facing the Russian construction industry as activity being concentrated in several regions, rather than being country wide. In 2007 the Moscow region accounted for 21% of Russia’s total construction output, yet during the first half of 2008 there was a significant drop in output in the Moscow region.

“Due to a lack of available plots for development, Moscow saw a -50% drop in output between January and August 2008,” said Mr Obetkon. “To compound this in the second half, the availability of mortgages has shrunk, and as a result property prices are falling. Expensive construction materials, high taxes and fierce competition are also hampering business in the construction sector.”

To see the full PMR report, please visit pmr