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Home > Manufacturing > Fabrication > Building/Construction
Ukraine Infrastructure Report Q3 2009
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Ukraine’s economic and political outlook has continued to decline in recent months and with it thepotential for growth in the value of the construction industry has been severely reduced. As such, inBMI’s Q309 Ukraine Infrastructure Report we believe the construction industry will contract by 22% inreal terms year-on-year.
Activity in the sector has been limited over the past quarter. The largest news in the transport sector wasthe granting of a US$400mn loan from the World Bank for the Roads and Safety Improvement Project forUkraine. The largest portion of the funds, US$298.50mn, will go toward the rehabilitation of a 120kmsection (between Boryspil and Lubny) of the Kiev-Kharkiv-Dovzhansky highway (the M-03). The projectis hoped to improve the safety and efficiency of Ukraine’s roads. Other developments in the sectorinclude 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 fromthe Russia-Ukraine gas crisis in late 2008 and early 2009, the country has been keen to upgrade itspipeline network and increase capacity and storage capability. The country proposed its master plan forthe renovation - which includes the construction of a new pipeline - to the EU in March, and anagreement has been signed for the project. In April, Ukraine agreed with Russia that Gazprom wouldplay a major part in the upgrade project, following the latter country’s initial anger at not being involvedin 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 2012European Football Championships, which Ukraine is co-hosting with Poland. The tournament hasbrought with it a drive to improve transport infrastructure and the construction of stadia, hotels and otherassociated facilities. However, there are fears that a number of Ukraine’s host cities may not be ready intime to host the tournament owing to delays in construction of the stadia and substandard transportinfrastructure. In May 2009, the head of UEFA, Michael Platini, only confirmed Kiev as a host city offour potential sites, citing insufficient infrastructure as a key reason. BMI believes that there may be arenewed investment drive in the hosting cities’ infrastructure as the final assessment is due in November2009. This potential for infrastructure investment is one of the few promising aspects of the country’sconstruction industry.
The limited activity in the infrastructure sector illustrates BMI’s pessimistic forecasts for growth in theindustry 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 thwartingthe government’s ability to pick up the slack in investment in infrastructure.
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