Report: Russia’s construction industry to improve after poor performance in 2015

28 April 2016 (Last Updated April 28th, 2016 18:30)

Growth is expected in Russia's construction sector at a compound annual growth rate (CAGR) of 2.52% between 2016 and 2020.

Growth is expected in Russia’s construction sector at a compound annual growth rate (CAGR) of 2.52% between 2016 and 2020.

A report by Timetric says this is an improvement from the CAGR reported in 2011-15 of -2.9%.

Plagued by currency depreciation, sanctions, insufficient foreign capital investment, and declining oil prices, construction activity slowed in 2015, which resulted in a weak sector performance.

Entitled ‘Construction in Russia – Key Trends and Opportunities to 2020‘, the report analyses factors that will act as catalysts in the coming years, which will offset existing decline. These factors include development of roads, housing, rail, airports, and other related infrastructure as part of the government’s Socio-Economic Development 2020 programme.

A number of schemes such as Housing for 2016-20 and Housing for Russian Family are focused on providing housing facilities for low-income and middle-income families. Promoting construction of affordable accomodation in this way is expected to spur growth in the residential construction segment.

The Timetric report further adds that the authorities plan to invest RUB11.6tn ($364.4bn) in transport infrastructure, including road, rail, sea, and inland-water, through the Development of Transport System of Russia 2010-20 programme. Upcomng developments such as the 11,000km of high-speed railway lines in 2030 will further add to the growing construction industry.

The sector is also expected to witness a surge due to an estimated RUB6.7tr ($210.1bn) investment in institutional construction to help build more kindergartens, schools and universities. The government also plans to make investments under its Development Education for 2013-20 programme.

A slight decrease is expected in 2016 before the industry starts to register growth. However, the report cautions against continuing Western sanctions and low oil prices, which may hinder recovery.