PUBLISHER: GlobalData | PRODUCT CODE: 1111790
PUBLISHER: GlobalData | PRODUCT CODE: 1111790
The impact of Western sanctions on Russia, following its invasion of Ukraine, had failed to deter the Russian Government from pursuing conflict with its neighbor. Six months into the war, the sanctions have managed to just marginally wound the economy. According to the Federal State Statistics Service (Rosstat), Russia's GDP fell by 0.4% year on year (YoY) in the first half of this year. However, the deterioration in economic conditions is set to accelerate over the coming quarters, as Russia faces weaker public finances owing to export restrictions and a cooling oil market, as well as labor market disruptions following the partial mobilization decree, which will exacerbate the impact of Western sanctions. Moreover, it is highly likely that the West will intensify sanctions on Russia in the near future, following Russia's signaled commitment to a protracted conflict, and its decision to hold illegitimate referendums in occupied regions of Ukraine. The trend is similar in the construction sector, with activity in the first half of the year largely unaffected by Western sanctions. The industry posted growth of 3.9% YoY in H1 2022. However, given the mounting economic damage that will continue to hit Russia over the coming quarters, construction activity is expected to drop significantly.
Due to the industry's relatively strong performance in the first half of the year, GlobalData expects the industry to expand marginally by 0.6% in real terms in 2022, before contracting by 6% next year, owing to headwinds caused by rising inflation and construction material prices, supply chain disruptions, as well as falling energy exports and public revenue. According to the Ministry of Finance, the country's Budget surplus fell sharply in August 2022, owing to sweeping sanctions and slowing energy exports. The country's public finances are expected to weaken in the coming months, given that Russia has significantly reduced natural gas exports to Europe, its primary market. Owing to diminishing revenues, the government now expects a Budget deficit of 2% of GDP in 2023, before narrowing to 0.7% in 2025. The strained financial position is expected to weigh on public spending on non-critical infrastructure projects in the initial part of the forecast period. In addition to this, the exodus of companies will also weigh on business confidence, thereby holding back private-sector investments in the coming quarters.
The report provides detailed market analysis, information and insights into the Russian construction industry, including -
This report provides a comprehensive analysis of the construction industry in Russia. It provides -