The report, ‘Capital project and infrastructure spending: Outlook to 2025’ (24-page / 5.68 MB PDF), said the Asia-Pacific market will represent nearly 60% of all global infrastructure spending within the next 11 years, “driven mainly by China’s growth”, while Western Europe’s share will shrink to less than 10%, from twice as much just a few years ago.
PwC said growing urbanisation in emerging markets such as China “should boost spending for such vital infrastructure sectors as water, power, and transportation”.
PwC’s capital projects and infrastructure practice global leader Richard Abadie said: “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. However, megacities in both emerging and developed markets, reflecting shifting economic and demographic trends, will create enormous need for new infrastructure. These paradigm shifts will leave a lasting, fundamental imprint on infrastructure development for decades to come.”
Abadie said that the types of infrastructure needed evolve as economies develop, “but not every country makes infrastructure spending a priority”. He said: “If you don’t invest when your economy is growing, you may find yourself very quickly at a point where your runways, roads, ports and rail lines are choked.”
According to the report, for which Oxford Economics provided research support: “Increasing prosperity in emerging markets will impel infrastructure financing toward consumer sectors, including transportation and manufacturing sectors that provide and distribute raw materials for consumer goods. Demographic changes will vary by region and country, affecting both the amount and type of infrastructure spending.”
PwC said spending across the 49 countries covered by its study fell from $3.4 trillion in 2008 to $3.2 trillion in 2009. Spending has since recovered to an estimated $4.2 trillion in 2013, “led by emerging markets especially in the Asia-Pacific region”.
The report said worldwide, capital project and infrastructure spending is expected to total more than $9 trillion by 2025, up from $4 trillion in 2012. “The annual growth rate will rebound from the low single digits of recent years to 6% in 2014 and 7.5% by 2016. As the economic recovery levels off later in the decade, the pace of growth is likely to ease slightly, but spending still should increase by more than 6.5% a year into the medium term.”
According to the report, manufacturing and extraction sectors will be “especially essential to support economic development. The manufacturing sector including petroleum refining, chemicals and heavy metals is set to grow at an annual rate of 8% worldwide up to 2025. “By then, manufacturing will represent 21.3% of global infrastructure spending, up from 18.8% in 2012.”
The former president of the Asian Development Bank, Haruhiko Kuoda, said in the report: “In Asia, we see enormous requirements for infrastructure. Without appropriate and adequate transport, countless millions of people lack access to jobs, markets, hospitals, and schools.”
PwC said the “economic rebalancing should eventually reach a tipping point” as emerging markets continue to expand their global reach and influence.
The total gross domestic product (GDP) in 2009 of the world’s seven leading emerging nations (China, India Brazil, Russia, Indonesia, Mexico and Turkey), the so-called ‘E7’, was about two-thirds that of the ‘G7’ group of seven major developed nations (US, Japan, Germany, UK, France, Italy and Canada), according to the report.
However, PwC said its analysis indicated “that by 2050, these positions will be reversed, with the E7’s aggregate GDP rising to almost double that of the G7.