BY Matt Atkins
According to new PwC research, global spending on infrastructure and capital projects is set to rocket, hitting $9 trillion by 2025, up from $4 trillion in 2012. The focus on spending will also shift from West to East, says the new report 'Capital project and infrastructure spending: Outlook to 2025'.
The majority of growth is expected to come from the emerging economies. China, which became the world's top spender on capital and infrastructure in 2009, will be a primary driver. “Emerging markets, especially China and other countries in Asia, without the burden of recovering from a financial crisis, will see much faster growth in infrastructure spending,” said Richard Abadie, global capital projects and infrastructure leader at PwC.
Developing economies currently account for nearly half of all infrastructure spending, and while mature markets will continue to grow, they will see their infrastructure spending shrink from nearly half of the global total today to about one-third by 2025.
Underlying this shift is accelerating urbanisation in many developing countries, which will result in spending growth in sectors such as water, power and transportation. Growing per capita income in emerging markets will also mean a larger middle class that will translate into infrastructure for manufacturing sectors that provide the raw materials for consumer goods and for more and better roads. However, though emerging economies represent the biggest opportunities going forward, CEOs are still apprehensive about the potential for slowdown in these regions. While emerging economies represent the biggest opportunities for infrastructure development and investment, CEOs worry almost as much about a slowdown in the emerging economies as they do about sluggish growth in the advanced economies.
Achieving this predicted growth decade will depend on whether emerging markets can provide the proper conditions for infrastructure development.
Besides the need for available capital, growth markets will need to reduce investor risk by establishing robust governance, a consistent regulatory framework, and political stability. Developing economies must also invest in training highly skilled and low-to-medium skilled workers to support design and construction activities.