Boston, MA -- (SBWIRE) -- 12/11/2013 -- We maintain our forecasts for Russia's construction industry value growth of 4.0% in 2014 and an average 4.1% year-on-year growth to 2022. This is underpinned by the government's drive to develop its vast natural resources, especially in Siberia and the Far Eastern provinces. The flagship project is the multibillion dollar Eastern Gas Programme, which will cement Russia's economic pivot towards Asia. In light of the developments planned, especially in the oil and gas sector, we see this positive outlook remaining the case to the end of the decade. Freight railways, pipelines, ports and power generation projects are all receiving attention and will therefore see high levels of growth in the coming years.

Key developments in the sector:

- Infrastructure associated with the export of commodities (pipelines, ports and transport infrastructure - to support oil and gas output east and west of the Urals) has a high growth potential - as development is predicated on growth in the natural resources sector. These projects have been prioritised by the government.
- The infrastructure projects surrounding the 2018 FIFA World Cup continue to buffer wider sector growth.
- The world's largest public-private partnership project in the toll road construction sector finally seems to be off the ground after years of delays. The first phase of the symbolic US$6.5bn Western High Speed Diameter (WHSD) toll road secured a US$1.8bn loan in June 2012, backed by a consortium of five banks comprising: Vnesheconombank, VTB Capital, Gazprombank, the European Bank for Reconstruction and Development, and the Eurasian Development Bank. The remaining US$1.2bn required for the first section will be supplied by the Russian government and state sponsors.
- The Russian state road agency Avtodor launched an open tender for the M-11 Moscow-St Petersburg highway in June 2013. The concession agreement will be for financing, constructing and operating a 137.5km section. Total construction costs are estimated at RUB84.4bn (US$2.65bn) and the construction costs are to be shared by the concedent and the concessionaire in the ratio of 75% to 25%, respectively.
- We have recently seen significant developments in the residential/non residential sector, including the announcement of a US$15.4bn government budget aimed at developing and modernising St Petersburg's residential buildings. This project - announced in August 2013, will see the development of 900ha of land in 22 different sites around St Petersburg.
- We maintain our view that political risk is the main element that can ultimately curtail growth as public policy remains opaque, convoluted and subject to frequent change. The planned privatisation scheme remains on the agenda; yet, on the back of heavy state involvement and strong vested interests, we believe foreign enthusiasm to be muted.

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