Economies need to invest at least $49 trillion in infrastructure by 2030

02 January 2017 Consultancy.uk

The world will require around $49 trillion in new economic infrastructure investment by 2030, according to a new report. As it stands, a total gap of around $5.2 trillion exists in terms of planned investment – with particularly China behind on investment. Key future investment demands, including sustainability goals, are not yet factored into the total. 

The world’s built assets remains a key background through which modern lives are structured. The total value of the built assets in 32 countries in 2015 amounted to just over $218 trillion, according to a recent report. Many of these assets, particularly in developed countries, are becoming old, while in many developing countries, changing demographics demand considerable additions to their asset stocks. 

In a report by McKinsey & Company, the consultants look at, among others, the development of global infrastructure in line with demand (pinpoints the gaps), as well as its quality in relation to the income of the countries in which it is constructed. The report is based on an economic model built by the firm, complemented by data from three sources: the Organisation for Economic Co-operation and Development (OECD), the International Energy Agency (IEA), and Global Water Intelligence (GWI).

 infrastructure investment from developing world

Future investment

According to the analysis emerging economies have continued to see considerable sums invested in the development of their wider infrastructure. China, for instance, spent 26% of the $31.4 trillion invested between 2000 and 2015, while North America and Europe spent 22% and 16% respectively.

The coming fifteen years will continue to see the lion’s share of investment made in developing nations, India is set to double its investment to 6% of the total, around $3 trillion, while China will up its investments to 29% of the total, or around $14 trillion. North America will continue to invest around 22% of the total, while Western Europe drops down to 12%. 

Required future investment breakdown

Future needs

The total of $49 trillion breaks down to around $3.3 trillion in annual investments through to 2030, in line with the projects related to the demands envisaged by the organisations cited by the report. The report however, does not take into account demands made by additional global goals, such as those set at COP21 and the UN Sustainable Development Goals.

The largest portion of spending is projected to be $1 trillion per year for power, while water and telecom will each need to see around $0.5 trillion. In terms of the % of global GDP per year, around 3.8% will need to be invested per year to keep pace with global project growth.

Infrastructure investment in 2013

Historic trend

According to the research of historic spending trends, in 2013 the world invested around 3.5% of its total GDP into economic infrastructure projects. China was the largest spending, with a total of 8.6% of its GDP going to infrastructure, followed by India, at 4.9% of its total GDP.

Across various regions, the largest spending, as a % of regional GDP, occurred in developed Asia and Oceania, at 4.6%, followed by the Middle East, at 4.3%. North America and Western Europe both invested less than the global average, at 2.5% apiece.

Infrastructure investment gap by geography

Required investment

Relative to historic trends, there will be a global spending gap of around 0.4% of GDP, or a total of $5.2 trillion, by 2030. The gap in spending, given that the global average is made up of sovereign states, is more significant in some regions than other.

The two countries with the largest investments in infrastructure, China and Qatar, enjoy a spending surplus, implying that they are in a position to reduce their investments. India on the other hand, is projected to spend less on its infrastructure than is demanded from its growing and maturing population – the county faces an annual gap of 0.5% of GDP.

Other countries that are ahead on their level of spending, relative to the projected needs, include Australia, at -1.2%; Russia, at -0.1%; Japan, at -1.5%; Italy, at -0.1%; and France, also at -0.1%.

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