Almost one-fifth of the $94 trillion in global infrastructure investment needed by 2040 risks being unfunded if current spending trends continue, the G20-backed Global Infrastructure Hub reported, but there is an $18 trillion shortfall between current investment projections and required spending.
The greatest demand is in China at $28 trillion, representing 30 percent of global infrastructure investment needs, while the United States has the biggest predicted shortfall, some $3.8 trillion. Poorer countries — such as Egypt, Nigeria and South Africa — have larger proportional investment gaps. Those three nations are forecast to meet only 69 percent of their infrastructure needs.
To close the spending gap, annual infrastructure spending needs to rise to 3.5 percent from 3 percent of global gross domestic product, according to a Global Infrastructure Hub report.
Every year, according to the organization’s report, $3.7 trillion needs to be invested in infrastructure to meet demand, equivalent to the annual economic output of Germany, the world’s fourth-largest economy. And to meet the United Nation’s sustainable development goals, which aim to ensure universal access to drinking water and electricity by 2030, investment needs to increase to 3.7 percent of global GDP between now and 2030, it said.
The investment is needed to support global economic growth and fill gaps in infrastructure in both developed and developing countries, the Global Infrastructure Hub has concluded.
The report details how much each country needs to spend on infrastructure to 2040, which sectors need it the most and how far they are from meeting these needs based on current spending trends.
“We believe this information will be key to governments, and indeed those organizations that fund, plan and build infrastructure projects into the future — and providing sustainable cities with social and economic benefits for all,” noted Chris Heathcote, the organization’s chief executive.
The Global Infrastructure Hub, set up by the G20 in 2014, aims to help to increase opportunities for public and private investment in infrastructure around the world. It is funded by governments including Australia, Britain, China and Singapore.
Underpinning the need for increased spending are forecasts that global population will rise by 2 billion people by 2040, as well as a 46 percent increase in urban population, driven primarily by Asia, which needs $52 trillion in investment by 2040 to meet that demand.
Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser.