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Ukraine Infrastructure Report Q4 2011
Business Monitor International, Sep 2011, Pages: 70
Business Monitor International's (BMI) Ukraine Infrastructure Report (Q4 2011) provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Ukraine's infrastructure industry.
BMI View:
Ukraine's beleaguered construction sector shows continued signs of growth thanks largely to the impetus of the 2012 football championships. BMI maintains its forecasts for growth this quarter as BMI sees the industry responding well to demand. Q1 2011 construction industry value was 7.8% higher than Q1 2010. The industry value is expected to reach US$4.9bn in 2011 equating to 5.9% year-on-year (y-o-y) growth. Over the forecast period, sustained growth will raise the industry value to US$9bn by 2015.
Key developments in the last quarter included:
- The overall value of the construction sector, construction site preparation and building and facility construction in Ukraine rose by 13.2%, 13.9% and 16.6% year-on-year (y-o-y) respectively during the five months to May 2011, according to Kyiv Post. The highest rise in construction volumes were seen in the Volyn, Kyiv and Cherkasy regions, which were significantly above national averages. Construction completion and the installation of utility equipment fell, however, during the same period.
- State-owned Export-Import Bank of Ukraine (Ukreximbank) secured a US$200mn loan from the World Bank to finance an energy efficiency project, reports Kyiv Post. According to the deal, which was signed on June 10 2011, the World Bank will loan the money to Ukreximbank against government guarantees over 30 years. The energy efficiency project is designed to reduce energy use and loss in the Ukrainian utilities industry. The World Bank will screen borrowers and other banks involved in the project to ensure they are contributing to the project s objectives.
- The European Investment Bank (EIB) has announced that it is set to provide a EUR450mn (US$642.8mn) loan in order to fund the refurbishment of major roads in the Ukraine. The loan is the largest made by the EIB to the Eastern bloc. The improvements are expected to tackle approximately 350km across the five sections of highway around the capital. BMI views the risk of a breakdown in relations between Kiev and the International Monetary Fund (IMF) as having risen well above the level that could be considered non-negligible. Nevertheless, BMI's long-held view for Ukraine to adhere its IMF Stand-By Arrangement (SBA) remains its core scenario and forms the basis of its political, economic and financial market outlooks for the country.
Political tensions are also rising between Ukraine and Russia, as the former moves into the concluding stages of negotiations regarding its Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union (EU). Russia is expected to step up its efforts to dissuade Kiev from pursuing greater ties with the EU. Ultimately, BMI believes that Kiev and Moscow will come to some sort of agreement in exchange for Ukraine shelving the DCFTA. Nevertheless, BMI cautions that tensions are likely to remain elevated in the near term as Russia and Ukraine continue to pursue aggressive lines of bargaining, and it does not rule out diplomatic ructions coming to a head.
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