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New Market Study, "Ukraine Infrastructure Report Q1 2014", Has Been Published

New Construction market report from Business Monitor International: "Ukraine Infrastructure Report Q1 2014"

 
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Boston, MA -- (SBWIRE) -- 01/01/2014 -- Our outlook for the Ukrainian construction sector has changed for the worse, as we have substantially downgraded our forecast for the construction industry value from a moderate 1.8% y-o-y real contraction expected earlier to a more painful 14.6% y-o-y real contraction during 2013. Although we expect the sector to return to positive growth territory from 2104, there is little likelihood that the market will be able to return to 2007 levels anytime during the forecast period to 2022. We believe growth in the infrastructure and the residential and non-residential construction sub-segments will remain constrained owing to weak government finances, highly cautious private segment spending and a difficult and uncertain operating environment.

Estimates from the Ukrainian statistical office suggest that following a 14.8% y-o-y contraction in output during Q113, the construction sector posted a 20.9% y-o-y decline in Q213. Indices for construction sector activity point towards weaknesses in both the infrastructure sub-sector as well as in the residential and non-residential sub-sector. The index for the building segment stood at 89.1 between January and September 2013, while that for civil engineering reached 79.4 during the same period.

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However, after modest growth between 2014 and 2017, growth could accelerate to 3% in 2018 mostly helped by a number of small projects, such as wind farms, port expansion and rail electrification, currently planned. The following are the key developments that support our view:

- Growth potential in the railways and airports sub-sectors will help the overall transport industry to maintain strong growth. An indicator of the railways' importance is the September 2013 announcement that Ukrainian Railways is expecting legislative reforms, mainly designed to attract private investment into the sector. The new legal framework is likely to compensate private investors for funding the development of Ukraine's public railways. Back in January 2013 Prime Minister Nikolay Azarov had revealed that the country would start construction of high-speed railways by the end of the year. Plans are also underway to modernise local rolling stock.
- In March 2013 Azarov announced plans to spend UAH7.2bn on road construction and repair during the year, which was expected to bring some much-required investment into the sub-sector. Vice Prime Minister Oleksandr Vilkul revealed that the investment was a part of a broader plan involving the renovation of over 9,000km of roads over the next two years.

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