BMI View : Russia's poor macroeconomic fundamentals, including a weak rouble exacerbated by international sanctions and a fiscal deficit driven by lower oil revenue, underpin our bearish outlook for the country's construction sector. Russia's residential and non-residential construction sector will be the primary victim of Russia's economic weakness and emerge as the clear underperformer, while the growth prospects for Russia's infrastructure sector are comparatively brighter on the back of a raft of high - value pipeline and transport projects.
Latest Updates And Structural Trends
International sanctions, which were renewed by the EU in June for a period of six months, continue to weigh on our real growth forecast for Russia's construction sector, which we have revised downward to -2.25% from -1.84% for 2016. However, we note that, in our view, international sanctions are likely to be lifted or eased at some point in 2017, providing a limited degree of upside risk to our longer-term growth forecast.
China will continue to emerge as the primary external financier of Russian infrastructure projects, as sanctions will largely preclude state-owned Russian banks from accessing global financial markets until at least January 2017. While China is investing across all areas of Russian infrastructure, it has been particularly active in investing in transport and energy projects throughout Russia's Far East that further its geopolitical ambitions.
We expect the Oil and Gas Pipeline subsector to outperform over the next five years with an annualised average growth rate of 3.6% as the Russian government prioritises funding for economically and geopolitically vital pipeline projects like Power of Siberia.
|e/f = BMI estimate/forecast. Source: BMI/Goskomstat|
|Construction industry value, RUBbn||3,957.20||4,125.40||4,470.70||4,918.90||5,376.40||5,808.90||6,276.10||6,749.20||7,291.30||7,876.80||8,509.20|
|Construction Industry Value, Real Growth, % y-o-y||-6.68||-2.25||2.37||4.02||3.30||2.05||2.04||1.54||2.03||2.03||2.03|
|Construction Industry Value, % of GDP||4.9||4.7||4.8||4.9||5.1||5.2||5.4||5.5||5.7||5.9||6.1|
Russia's overall score holds fast at 51, below the regional average of 55.3 and placing it above Bosnia, Uzbekistan, Kazakhstan, and the Ukraine.
Russia's Country Risk score registered a slight increase to 62.2 on the back of policy continuity. More broadly, Russia's country risk profile remains largely unchanged - the country continues to be plagued by pervasive corruption, a weak institutional framework and relatively high levels of external risk stemming from the country's involvement in Syria and in eastern Ukraine.
Russia scores third to last on the Industry Rewards pillar with a score of 40, owing to our negative outlook for construction sector growth, anaemic levels of capital investment and the fiscal weakness of Russia's government, the last of which will constrain the state's ability to adequately fund construction projects.
|Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
The Russia Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Russia Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Russian infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Russia to test other views - a key input for successful budgetary and planning in the Russian infrastructure market.
- Target business opportunities and risks in the Russian infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Russia.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.