Global infrastructure investment needs to increase
The World Bank recently published its Global Infrastructure Outlook, which compares seven sectors across 50 countries, and the results are extremely interesting. The aim is to use the data to forecast what infrastructure investment will be needed around the world by 2040, as well as putting a number on the cap between what is currently being spent and what will have to be spent by that time.
The main takeaway from the report is that the global population is expected to grow by 2 billion by 2040, and that the earth’s urban population will grow by 46% over that time. We are clearly staring down the barrel at a profound economic and demographic change over the next two decades, and it is not clear that the various governments of the world are really cognisant of what will need to be done. The World Bank estimates that US$94 trillion will need to be spent on infrastructure by 2040 to provide for everyone. That total goes up to US$97 trillion when you take into account the UN Sustainable Development Goals which mandate the universal provision of clean water, sanitation and electricity.
The World Bank analysis reveals that we are a long way off meeting these goals. The current estimated shortfall is approximately US$18 trillion, or to put it another way the world needs to spend almost 1% more of annual GDP on infrastructure indefinitely. This may not sound like a lot, but it very much is, especially as the majority of extra spending is needed for road and electricity networks which are among the most complicated and expensive measures to implement.
Of the top five countries with the greatest need to increase their infrastructure spending, three are in Asia – China, India and Japan. China in particular has been singled out as needing to invest US$28 trillion into its infrastructure by 2040, a figure which makes up over half of Asia’s need and about 30% of the global total.
However, the biggest single investment needed is not in China; the USA sits comfortably in first place in the rankings, with the world’s biggest infrastructure spending gap. To be fit for purpose by 2040, the USA will have to get serious about infrastructure spending very soon. Other significant offenders include Brazil and Russia, both of which are scheduled to undergo massive economic growth in the coming decades which will necessitate serious spending.
The big question is over whether we will collectively manage to meet worldwide infrastructure needs. For the World Bank, the answer is a firm no at the moment, and it predicts that the targets will be missed by quite a margin. Importantly, the report notes that the amount which already-developed countries invest in countries which are still developing must increase enormously, and this investment must be for beneficial projects rather than, for instance, foisting unwanted coal plants on them.
It will be interesting to see if we can rise to the challenge in the coming years.
