Global infrastructure construction market to reach US$4.2 trillion by 2020

29 Mar 2017

According to a new report published by Timetric’s Infrastructure Intelligence Center (InfraIC), the global infrastructure construction market totaled US$3.1 trillion in 2016, and it is expected to reach US$4.2 trillion by 2020.

 

A high-functioning infrastructure base, and strong political and financial institutions are key features of sustainable long-term economic growth. For emerging economies, such as in the Southeast Asian region, turning economic growth into infrastructure construction is crucial. Investment in power and water and transport networks will help to grow physical and human capital, facilitate the movement of goods and people, open trade corridors and reduce trade costs. Mature economies face slightly different challenges. Ageing populations and changing demographics create shifting infrastructure requirements. As infrastructure ages, decisions need to made about whether it is still fit for purpose and if refurbishment or rebuilding is the best option.

 

Infrastructure Spending Growth (2011−2015 vs 2016−2020)

 

In terms of spending as a percentage of GDP, China and India and other emerging Asian countries have been driving much of the growth in infrastructure spending. China is of particular note, combining high spending as a percentage of GDP with a large scope for infrastructure spending, given that its economy accounts for 18% of global GDP. While better than average in most regions, 50% of global GDP is represented by Western Europe and the US and Canada, which are all recording ongoing, if somewhat muted, infrastructure spending. 

 

According to the InfraIC’s Scott Taylor: “This is not an unexpected result; developed economies have a far higher quality of infrastructure and less need to invest across all sectors, but in particular in basic needs infrastructure, such as the water and sewerage and some parts of the electricity and power and telecommunications sectors.”

 

Suppressed infrastructure growth is likely to continue in Western Europe, the US and Canada and Developed, Asia and Oceania out to 2020. These regions are expected to lose infrastructure market share, declining from a share of 38% of the global infrastructure market to 34% over the 2016−2020 period. Developing nations will continue to drive growth, led by China and Southeast Asia.

 

In nominal terms, China spends over 2.5 times that of Western Europe in second place. The magnitude of China’s influence on global infrastructure can be seen by the sheer size of its market combined with forecast annual growth to 2020 of 10.5%. Other Emerging Asia is a clear prospect, with the remaining regions of the globe facing more subdued growth owing to either being a developed economy with a mature infrastructure base, or facing issues such as rising public debt or declining growth in the commodities markets

 

Ghana and Ethiopia are expected to record the fastest growth in infrastructure to 2020, followed by Malaysia. The Middle East and Africa is particularly strong in terms of investment in railways. Qatar, for example, is forecast to grow by 25.2% on average each year to 2020, driven by the US$44.4 billion Rail Integrated Network project currently under construction in Doha, expected to add 1,010km to an almost non-existent rail network.

 

The InfraIC is currently tracking over 12,700 large-scale infrastructure projects worldwide in both the public and private sectors. Collectively these projects are worth US$14.2 trillion, including projects at all stages of development, from announcement to execution. The electricity and power sector has the most projects in the pipeline with 6,171, followed by roads (2,887), railways (1,641), airports and ports (1,237), and water and sewerage (853). In terms of US dollar value, power and electricity projects dominate, valuing US$5.4 trillion, while railways, valued at US$5.2 trillion, account for the second-largest sector. Roads projects recorded the third-largest share with US$1.9 trillion, followed by airports and ports projects which make up US$1.2 trillion, and water and sewerage which accounts for US$421.5 billion.

 

Infrastructure Project Pipeline (US$ billion)

 

The PPP Perspective

 

Timetric has developed a “PPP Perspectives” model that assesses the extent to which the Public-Private Partnerships (PPP) environment has developed in 60 major countries and the upcoming opportunities that exist in these countries’ PPP projects. The development of PPPs in a country is a major driver in attracting private sector investment, the most significant contributor to global infrastructure gaps. Based on the projects tracked by the InfraIC, more than 27% of all projects globally are being financed by joint public-private funding schemes. 

 

The model incorporates an assessment of actual investment activity through an analysis of Timetric’s infrastructure projects database. Among the key metrics considered are the ratio of PPP projects to total projects, the total value of projects undertaken via PPPs, the successful completion of PPP projects against cancelations, and the use of PPPs across a range of infrastructure sectors. The model also features an assessment of the risk of investing in PPPs, measured by an algorithm that covers the political and regulatory environment, financial market development, government payments risk, and investor attractiveness.

 

The Netherlands is among the leaders when considering PPP success; it ranks 2nd in terms of the value of PPPs as a percentage of total projects, and ranks 3rd in terms of the diverse nature of PPPs across a range of infrastructure sectors. Combined with its low risk profile, the Netherlands is the top performing country in terms of its overall “PPP Environment”. 

 

A more forward-looking view of opportunities for PPP investment is derived through an assessment of the current PPP project pipeline. Countries that perform well in terms of PPP opportunities are those that have a healthy project pipeline, spread across all development stages (from early announcement to contract awards and execution), and present low to moderate theoretical risk. 

 

Malaysia ranks 1st in the “PPP Opportunities” rankings, with PPPs being heavily promoted in infrastructure construction. Notably, countries with higher risk are associated with higher scores for prospects, an outturn that reflects the relatively higher risk scores for fast-growing emerging markets, Vietnam being an example of this.

 

The overall “PPP Perspective” score is a combination of a country’s PPP environment and opportunities. The Netherlands, Australia and the UAE take the top three places in combined rankings, in which a country’s risk profile is embedded

 

 

About this report

 

This information is taken from the Timetric report: ‘Global Infrastructure Outlook”. To obtain your free White Paper, please contact us at reports@timetric.com reports@timetric.com

 

To purchase the full report, click here

 

Clients of the Infrastructure Intelligence Center can access the report here

 

About the Infrastructure Intelligence Center

 

The Infrastructure Intelligence Center is the most comprehensive source of data and analysis on the global infrastructure industry. Our unique construction projects database tracks major new projects globally and can be contextualized with our forecasts of future project activity, rich market data and analysis as well as competitive intelligence and company activity to help companies understand market attractiveness and risks, and realise market opportunities.

 

For more information and updates, please visit http://www.infrastructure-ic.com/

 

About Timetric

 

Timetric is a leading provider of online data, analysis and advisory services on key financial and industry sectors. It provides integrated information services covering risk assessments, forecasts, industry analysis, market intelligence, news and commentary. For more information and updates, please visit www.timetric.com.

 

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