Ukraine war to cut Eastern Europe construction output by 3.4%: analysis

Rising inflation and weak investor confidence amid Russian President Vladimir Putin’s ongoing invasion of Ukraine will lead to a 3.4% reduction in Eastern European construction output this year, says analytics company GlobalData.

It expects output in Russia to decline by 9.2% this year owing to sanctions, while economies that are interlinked with Russia will suffer from trade and supply chain disruptions and lower tourism activity.

Finland is one country facing an acute shortage of steel, with supply disrupted from Russia, Belarus and Ukraine.

Joel Hanna, Economist at GlobalData, said most Eastern European countries will face rising energy prices and currency devaluations owing to weakened investor confidence in the region.

“Moreover,” he said, “household income squeezes are likely to weaken demand and undermine growth in commercial construction projects, while rising construction costs will push housing prices higher, reducing demand for residential construction.”

Public sector construction may be hit as government finances are strained by rising living costs and historic levels of refugee flows from Ukraine into Poland, Romania and Hungary.

Construction output in Ukraine itself is projected to fall by 69% in 2022, dampening aggregate output for Eastern European construction, GlobalData said.

Finland, meanwhile, is on the sharp end of a European steel shortage. Around a quarter of steel used in construction there comes from Ukraine, Russia and Belarus, the Confederation of Finnish Construction Industries told Finnish state broadcaster YLE.

“Building starts with the pilings and if you get no offer to supply steel pilings for a building, the entire site may come to a halt,” said Juha Luhanka, the confederation’s deputy director.

Steel prices nearly doubled in Finland during the pandemic and some steel products now cost four times what they did pre-pandemic, YLE reported.

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