As international diplomacy begins to question how Ukraine will be rebuilt and there is speculation in the European Union about allocating the assets seized from Russian oligarchs to finance it, the global construction market is looking at the next five years as a period of turning point and even rebirth.
The war has hit the Ukrainian and therefore the Eastern European markets hard, but it has not meaningfully impacted the global trend of large construction projects, because governments in advanced economies see infrastructure spending as an essential tool for post-Covid-19 economic recovery.
The study “Construction Market Site, Trends and Growth Forecast, 2022-2026,” by GlobalData (one of the world’s leading centres of analysis on the sector), offers a snapshot of international market trends starting from the very countries where the biggest risks and crises are concentrated: Ukraine and Russia.
Ukraine and Russia, united in crisis
On one side is war, on the other sanctions. On one side is Ukraine, its largest cities destroyed and to date unable to plan for reconstruction in the short term; on the other is Russia, abandoned by Western multinationals and reduced to economic exhaustion by financial sanctions.
This is why GlobalData calculates that in 2022 the construction market in Ukraine will collapse by 69.1%, while the Russian market –affected to a much lesser extent — is set to contract by 9.2%.
The bombs falling on Kiev, Odessa and other major Ukrainian cities are making their effects felt throughout the region, negatively impacting the construction market in Eastern Europe.
“Construction in most countries in Eastern Europe is likely to be affected by rising energy prices, exacerbated supply chain disruptions and local currency devaluations owing to weakened investor confidence in the region over the uncertainty of the Russia-Ukraine crisis,” wrote Joel Hanna, an economist at GlobalData.
Construction market still strong in United States and Canada
The echoes of the war are only partly reaching the North American continent. The United States and Canada seem to be delivering on their promises when it comes to growth in the construction market. According to GlobalData, the entire outlook for the sector over the next five years is positive, guaranteed in part by the willingness — expressed repeatedly by U.S. President Joe Biden — to continue on the path of countercyclical infrastructure investment.
Biden’s promise gives courage and confidence to the market, which is nevertheless facing a set of difficulties such as rising commodity prices and increasing inflation. Canada also expects to continue to grow in the coming years, mainly due to investment in residential construction and maintenance work on Canada’s major infrastructure, one of the first items on the agenda of the government led by Prime Minister Justin Trudeau.
Europe's boom withstands the winds of crisis coming from the East
Having overcome the Covid-19 crisis, EU members have no intention of giving up hard-won growth. The Next Generation EU investment program to be carried out in the various countries through the National Recovery and Resilience Plans calls for considerable investment in the infrastructure sector, which is seen as a tool for economic revitalisation. The sector is also seen as a way to help complete the energy transition, which the European Union has identified as a pillar for the continent’s development.
In light of these investments, European markets will remain solid in the coming years, confirming growth trends that will of course be partly revised due to the Ukrainian crisis. Russia and Ukraine are important suppliers of steel to Europe, as well as oil and gas. The war between the two countries and supply interruptions will contribute to higher energy and raw material costs. These higher prices, however, will be at least partly compensated for by massive investments in the sector space, as well as national spending plans by governments. Italy alone is planning some €60 billion in infrastructure investments from its National Recovery and Resilience Plan and other funds in the coming years. These investments will be used to complete the major works already started, from the Genoa-Milan high-speed rail link to the high-speed rail link connecting Naples to Bari, and a high-capacity railway in Sicily. It is still too early to calculate exactly what the impact of the war in Ukraine will be on Europe, but — from the response of individual countries and European institutions — it is clear that the Old World does not want to miss the opportunity for growth offered by the recovery from the Covid crisis.