Russian growth

By Sandy Guthrie29 September 2011

Healthy growth described as reminiscent of figures from before the global economic crisis are being reported from the Russian construction sector.

Research company PMR said the sector had finally posted some healthy growth figures in the second half of the year. In July, a 17.6% increase was posted, followed by a 12.4% increase in the value of construction works in August.

In the first half of 2011, the overall picture of the construction industry in Russia was mixed, said PMR.

While construction companies' financial results deteriorated, managers voiced their expectations in surveys conducted by the Federal Statistics Service (Rosstat) of increased profits in the future. They also said they expected the number of workers in the industry to grow, whereas employment levels in construction actually fell in the first months of the current year.

Although the value of construction contracts signed was higher than in 2010, this did not translate into growth in the value of construction works carried out, PMR found.

Only in July did the sector finally see an upswing. According to Rosstat, the value of construction works in July increased by as much as 17.6%, with the completion of residential floor space up by 19%.

Thanks to the healthy July performance, overall January to July growth was brought to almost 5%, as compared to the meagre near-zero growth in the first six months of the year.

This was followed by a 12.4% increase in the value of construction works in August. Overall, the value of construction output was 6.2% higher in the first eight months of the year than in the equivalent period of last year.

PMR said the performance of different segments of the construction industry varied. It reported that whereas the residential sector remained subdued, civil engineering projects related to the 2012 APEC (Asia-Pacific Economic Co-operation) Summit in Vladivostok and the 2014 Winter Olympics in Sochi had continued to be the major drivers, and many of these projects were nearing completion.

"In 2010, the need to focus on these priority projects meant that financing for smaller, unrelated projects, was affected," said PMR. "In 2011, the overall volume of spending on infrastructure development is increasing and this should result in improved support for such projects."

The sector also received a welcome boost late last year with the decision to award the 2018 FIFA World Cup to Russia. Stadiums and airports in all the host cities will need to be either built or modernised, and adequate road and rail connections will need to be guaranteed.

So far in 2011, housing construction levels have been on par with 2010 levels. PMR said that not only was increased investment necessary to speed up construction, it felt that first of all, perhaps, the continuous simplification and rationalisation of the legal environment for property development was needed.

"Although necessary changes are being put in place, the process is still too slow and the number of procedures connected with housing development still far from being investor-friendly."

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