Ukraine’s Construction Sector Is Forecast To Contract By 22% Year-on-year From Q309

Aug. 1, 2009 - PRLog -- Ukraine's construction sector is forecast to contract by 22% year-on-year from Q309. Ukraine's economic and political outlook has continued to decline in recent months and with it the potential for growth in the value of the construction industry has been severely reduced. As such, in the Q309 Ukraine Infrastructure Report we believe the construction industry will contract by 22% in real terms year-on-year.

Activity in the sector has been limited over the past quarter. The largest news in the transport sector was the granting of a US$400mn loan from the World Bank for the Roads and Safety Improvement Project for Ukraine. The largest portion of the funds, US$298.50mn, will go toward the rehabilitation of a 120km section (between Boryspil and Lubny) of the Kiev-Kharkiv-Dovzhansky highway (the M-03). The project is hoped to improve the safety and efficiency of Ukraine's roads. Other developments in the sector include construction starting on the US$125mn runway upgrade at Lviv International Airport.

In the power sector the country's gas pipelines have been getting the most attention. Following on from the Russia-Ukraine gas crisis in late 2008 and early 2009, the country has been keen to upgrade its pipeline network and increase capacity and storage capability. The country proposed its master plan for the renovation - which includes the construction of a new pipeline - to the EU in March, and an agreement has been signed for the project. In April, Ukraine agreed with Russia that Gazprom would play a major part in the upgrade project, following the latter country's initial anger at not being involved in the plan. It remains to be seen how big a role the EU will now play in the project.

The construction industry in the country continues to be sustained by preparations for the UEFA 2012 European Football Championships, which Ukraine is co-hosting with Poland. The tournament has brought with it a drive to improve transport infrastructure and the construction of stadia, hotels and other associated facilities. However, there are fears that a number of Ukraine's host cities may not be ready in time to host the tournament owing to delays in construction of the stadia and substandard transport infrastructure. In May 2009, the head of UEFA, Michael Platini, only confirmed Kiev as a host city of four potential sites, citing insufficient infrastructure as a key reason. BMI believes that there may be a renewed investment drive in the hosting cities' infrastructure as the final assessment is due in November 2009. This potential for infrastructure investment is one of the few promising aspects of the country's construction industry.

The limited activity in the infrastructure sector illustrates the pessimistic forecasts for growth in the industry in 2009. The deep contraction in the country's economy forecast for 2009 (-14.7% y-o-y), combined with a precarious and fractious political climate is putting off potential investors and thwarting the government's ability to pick up the slack in investment in infrastructure.

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