INFRASTRUCTURE SPENDING TO FALL SHORT

Infrastructure spending could face a multi-billion dollar gap, although less so in Asia, the influential Global Infrastructure Outlook has said, as growth and demographic shifts raise the amount of hardware needed.

 

Global infrastructure spending will reach US$3.8 trillion in 2040, an increase of 67% over the 2015 value in real terms, the report said. However, if countries want to raise their games to match their best performing peers by the resources dedicated to infrastructure, the forecast value of infrastructure investment needs to rise to US$4.6 trillion in 2040.

 

“That is, by 2040, there could be a gap of US$820 billion between what would be spent if current trends continue and what could be spent if all countries matched their best performing peers,” the report noted.

 

This latter scenario will require an increase in the funds made available for building the new hardware. While the current benchmark is 3% of GDP, the more ambitious following-the-leaders scenario needs to see that rise to 3.5%.

 

Asia, as the report acknowledges, is the “one exception” as economies in the region, most notably China, have invested very strongly in infrastructure in recent years.

 

The report hints at where shortfalls could occur, although specific links in the future supply chain are not identified. China does not need to spend much more, the report says, but it does need to redirect some of it.

 

“The road and electricity sectors account for a large proportion of China’s estimated future spending need. Together they account for US$18 trillion out of the US$26 trillion total spending forecast under current trends,” the report said. Airports are noted as another area where improvements could be made.

 

Outside of China, it’s a similar story, but one complicated by much more varied economies. “The three Asian economies in our sample with the lowest levels of GDP per head also have amongst the largest gaps, relative to what would be spent under current trends: Bangladesh, Cambodia and Myanmar,” the report said.

 

Asia excluding China will invest US$19.7 trillion between 2016 and 2040 under current trends, rising to US$22.4 trillion, a 13% increase under the keep-up scenario, or US$895 billion per year, according to the report.

 

Largest of these is India, where the estimate is the country will need to invest US$3.9 trillion under current trends, increasing to US$4.5 trillion under the investment-need scenario.

 

 

By Michael Mackey

Southeast Asia Correspondent | Bangkok