Russian construction industry set to grow by 2.6% in 2021 due to infrastructure investments, says GlobalData

The Russian construction industry contracted marginally in 2020, with output declining by 0.7% in real terms. The lockdown measures and subsequent economic slowdown, as well as the severe dip in oil and gas prices weakened the construction industry. However, supported by investment in major infrastructure projects, rising oil prices and global economic recovery, the industry is expected to recover in 2021 with an expected real growth rate of 2.6%, says GlobalData, a leading data and analytics company.

GlobalData’s report, ‘Construction in Russia – Key trends and opportunities to 2025’, reveals that following the recovery in 2021, the country’s construction industry is expected to grow at an annual average growth rate of 2.8% in real terms over the remainder of the forecast period (2022–2025). The growth outlook also reflects faster growth in infrastructure investment, which will help to offset a slightly weaker outlook for buildings and industry construction.

Danny Richards, Lead Economist at GlobalData, comments: “The government will continue to promote infrastructure investments in the wake of the COVID-19 crisis. In 2019, the government had outlined plans to spend RUB6.3 trillion (US$96bn) on the development of the country’s transport infrastructure over the next five years, but in November 2020, it was reported that the transport infrastructure spending plan had increased to RUB7 trillion for the next five years, pushed up by additional private investment.”

Having suffered severe disruption during much of the second quarter amid widespread travel restrictions and nationwide lockdowns, there have been general signs of a recovery in the construction industry. In Russia, the Construction Project Momentum Index decelerated in Q1 2020, falling to 0.65. Disruption in April resulted in the score dropping to 0.27. However, the performance has improved since April, with the score rising to 0.39 in May. In August 2020, the score increased to 0.87, but it had dropped to 0.53 in January 2021.

Richards adds: “Investments in the oil and gas sector were delayed or postponed owing to the steep fall in demand as well as prices, but the projects are now being reactivated owing to a recovery in oil and gas prices. Projects in Russia’s energy and utilities sector, as tracked by GlobalData, have a combined value of US$224.1bn. The pipeline, which includes all projects from pre-planning to execution with a value above US$25m, is skewed towards late-stage projects, with 68.2% of the pipeline value being in projects in the pre-execution and execution stages as of February 2021.”

More Media