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BMI View: Russia's poor macroeconomic fundamentals, including a weak rouble exacerbated by
international sanctions and a fiscal deficit driven by lower oil revenue, underpin our bearish outlook for the
country's construction sector. Russia's residential and non-residential construction sector will be the
primary victim of Russia's economic weakness and emerge as the clear underperformer, while the growth
prospects for Russia's infrastructure sector are comparatively brighter on the back of a raft of high-value
pipeline and transport projects.
Latest Updates And Structural Trends
? International sanctions, which were renewed by the EU in June for a period of six months, continue to
weigh on our real growth forecast for Russia's construction sector, which we have revised downward to
-2.25% from -1.84% for 2016. However, we note that, in our view, international sanctions are likely to be
lifted or eased at some point in 2017, providing a limited degree of upside risk to our longer-term growth
? China will continue to emerge as the primary external financier of Russian infrastructure projects, as
sanctions will largely preclude state-owned Russian banks from accessing global financial markets until
at least January 2017. While China is investing across all areas of Russian infrastructure, it has been
particularly active in investing in transport and energy projects throughout Russia's Far East that further
its geopolitical ambitions.
? We expect the Oil and Gas Pipeline subsector to outperform over the next five years with an annualised
average growth rate of 3.6% as the Russian government prioritises funding for economically and
geopolitically vital pipeline projects like Power of Siberia.