Boston, MA -- (SBWIRE) -- 01/27/2014 -- BMI View: Our estimates for a contraction in France's construction sector in 2013 have been reinforced by official data reporting negative growth of 2.7% in the first nine months of the year. The industry has been contracting consecutively since 2008 and we believe that the recession has continued in 2013 as a result of week macroeconomic recovery. Our Country Risk team estimates 0% GDP growth for 2013 and a slight recovery at 0.5% real growth in 2014. On that basis, we are also more optimistic towards 2014 when we expect the construction industry to return to low but positive growth at 0.5% in real terms supported by the development of transport infrastructure projects.

Our slight optimism for the French construction industry comes on the back of growth in the infrastructure industry, which we expect to outperform the overall construction sector. Buoyed by growth in the transport segment, we expect the share of infrastructure in the total value of the construction industry to increase from an estimated 18% in 2014 to 25% by 2022. This will lead to average annual real growth of 1.7% in the construction sector over the period.

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Key developments in the sector:

- In October 2013, the French Ministry of Ecology, Sustainable Development & Energy signed a Public- Private Partnership (PPP) agreement with a consortium led by Bouygues Construction to construct the new Marseille L2 bypass. The 30-year contract will include the financing, design, construction, maintenance and restoration of the bypass. The project, entailing investment of around EUR620mn, is expected to last over four years and is scheduled to be handed over in October 2017.
- The EIB has approved a EUR300mn loan to partly finance the upgrade of the Lille metro system. Thirty years after it was opened, Lille's metro will benefit from the modernisation of its driving system in addition to the purchase of new trains and equipment. This is part of a EUR610mn project to double public transport capacity by 2020.
- The government's commitment towards the railway sector remained intact in 2013, with Prime Minister Jean-Marc Ayrault announcing plans to proceed with the Nouveau Grand Paris project. The programme entails the construction of a network of orbital automatic metro lines stretching nearly 200km and serving the outer suburbs of the capital. The project has a budget of EUR30bn and is due to be completed by 2030.
- In July 2013, the supervisory board of the Societe du Grand Paris authorised US$7bn in new rail funding for the French capital. The contract includes the design and construction supervision work of 21km and eight stations on the south-west section of Line 15.

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