Ukraine Infrastructure Report Q2 2016
BMI View: We continue to hold a negative view of the Ukraine's infrastructure sector. Sustained pressureon public spending and a hostile foreign investment environment will continue to hamper new developmentsand the project pipeline remains slim, despite a growing infrastructure deficit. As such constructionindustry value is expected to record further contractions over the short term, before slowly returning torecovery over the latter stages of the forecast period. Some potential upsides include an influx of fundingfrom regional bodies to aid infrastructure recovery, as well as the (much delayed) privatisation of key stateowned assets.
Latest Updates And Structural Trends
Large sections of Ukraine's power network were affected by a cyber attack in late 2015, with attacksreportedly continuing through January 2016, resulting in widespread power outages. These attackshighlight the vulnerability of Ukraine's infrastructure network to cyber attacks and will likely promptinvestment in greater cyber security.
Meanwhile, power disruptions to the annexed Crimea continue following the destruction of substations inlate 2015. Russia is seeking to establish direct electricity grid links with the annexed region, vital asCrimea's existing power plants only cover 20% of demand.
The poor investment environment in Ukraine, exacerbated by ongoing conflict and political tensions, willcontinue to hamper growth in the infrastructure sector. We expect construction industry value to fall by13.1% in 2016 followed by a further decline of 4.68% in 2017 before a tentative return to growth.
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