Boston, MA -- (ReleaseWire) -- 05/01/2014 -- Kazakhstan's construction industry will experience solid growth over our forecast period on the back of continued investment into the hydrocarbons sector, transport links and industrial projects. However, following a major devaluation in the tenge, we have downgraded our forecasts for the sector, as the nascent development of the residential and non-residential sectors will be negatively impacted. We estimate that 5.7% growth was posted in 2013 and as progress is made on a number of largescale projects, a revised down forecast of 7.3% is expected in 2014. Long-term political stability remains the major risk to confidence, although there are signs that a presidential successor is being lined up, which will lower the risk outlook. The construction sector will remain exposed to global oil and commodity price fluctuations.
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Key Trends And Developments
- We are mainly highlighting the downside to the currency devaluation. While the devaluation will provide a boost to net exports, it is set to drag on the key driver of Kazakh economic activity: private consumption. As such, demand for housing, commercial and industrial construction will all diminish over the short term at least.
- Kazakhstan President Nazarbayev said the Light Rail Transport project proposed by Alstom is overly expensive for Astana, so the city will get a bus rapid transit network instead. The bus system, involving a network of designated lanes, will be ready by 2016.
- DP World will develop a new free economic zone in Kazakhstan. DP World will develop the Khorgos- Eastern Gates zone and Aktau port in order to establish the largest logistics centre in Eurasia. It will invest at least AED3.67bn (US$1bn) in the project.
- The much touted high-speed line between Astana and Almaty, has been postponed due to a lack of financing. The government has stated that a lack of commercial viability has made financing the project a challenge, confirming our view that the demand dynamics for such a project were likely to be a major hurdle to overcome.
- The 2017 EXPO in Astana is set to boost the construction industry. Construction of the site, which the government is funding to the tune of US$325mn, is expected to begin in March 2014.
- Astana is the focus of residential and non-residential construction activity in the country. Most recently, a US$1.4bn contract was been awarded to a joint venture company, led by Arabtec. The project will be named Abu Dhabi Plaza, comprising a mixed-use development of 500,000m2. The project is expected to be completed in 2017, although a recent strike by Arabtec construction workers over pay rises may delay that.
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