After falling during the first half of 2020 because of coronacrisis, construction volumes in Ukraine have been steadily increasing since August, mainly due to large-scale construction projects.
In December 2020, the growth of construction volumes remained quite stable - 9.9% yoy. As in previous months, the main driver was the construction of engineering structures (+ 31.4% y / y), primarily roads. Instead, the decline in the volume of housing construction (26.9% yoy) and non-residential buildings (12.1% yoy) deepened, which was primarily due to adverse weather conditions. In general, in 2020, construction increased by 4% yoy p, which was the lowest growth rate since 2016.
At the same time, the growth occurred only due to a significant increase in road construction (2.3 times y / y in monetary terms), the share of which in total construction increased to 31% compared to 16% on average over the previous three years. Volumes of other construction were lower than in 2019, housing construction fell particularly significantly - by 18.5% yoy.
In general, government infrastructure projects are a classic recipe for overcoming the economic recession. In Ukraine, they have much higher fiscal multipliers than social expenditures, ie they create a stronger positive effect on the country's GDP for every hryvnia spent from the budget.
In addition, in Ukraine, with its logistics problems, roads have a significant positive impact on the long-term potential of the economy, increasing its efficiency.
The main negative point is that in the conditions of limited own funds and access to cheap financial resources, in particular from the International Monetary Fund, these infrastructure projects are financed through debt borrowings that are expensive for Ukraine. Consequently, they became one of the main factors in the sharp increase in public debt to GDP last year, which in turn hinders the decline in the cost of market borrowings.
Returning to construction, I note that in 2020, the share of construction in GDP is likely to increase to 2.9% compared to 2.7% in 2019. This is still significantly lower than the EU average of 5%. And, given the significant underinvestment of the domestic economy, including in transport infrastructure, in the coming years we can predict outpacing growth in construction.
In 2021, we expect that public investment in infrastructure will remain at a high level in 2020, and the role of the main driver of construction growth will move to the private sector, in particular in the areas of logistics and new industrial facilities of the mining and metallurgical complex.
Link to the original source: http://budport.com.ua/news/20177-yak-budivnictvo-dorig-strimuye-padinnya-vvp-infografika
