Capital projects and infrastructure spending trends: Key findings

Regional Focus
Global capital project and infrastructure market value expected to exceed $9 trillion per year by 2025
Developing economies account for nearly half of all infrastructure spending
Manufacturing sector expected to grow to $1.9 trillion in 2025
Social infrastructure declines in global spending share to 15% in 2013
Asia’s share of global infrastructure spend set to rise to 39% in 2018, and 47% by 2025

Capital projects and infrastructure spending trends: Key findings

What are the driving factors that determine capital project & infrastructure spending among the world’s largest economies? Explore key findings.

CP&I spending is expected to exceed $9 trillion by 2025

  • The global capital project and infrastructure market is expected to be worth over $9 trillion per year by 2025 -- up from $4 trillion in 2012.
  • Not surprisingly, the majority of the growth is expected to come from emerging economies.
  • Underlying sector, demographic and urbanisation trends will help shape which areas of investment will grow.
  • Spurred by needed investment in core infrastructure sectors -- extraction, utilities, manufacturing, transportation, and social infrastructure -- growth in the manufacturing and oil and gas extraction sectors is expected to help drive overall growth.
  • Significant global events or disruptions could clearly alter these projections.
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Rapid growth in emerging markets

  • Developing economies account for nearly half of all infrastructure spending, up more than 10 percentage points from 2006. Western Europe accounts for only 12% of global spending now, down from about 20% in 2006, 19% in 2008, 13% in 2013, 12% in 2014, and by 2025, it will account for only 8%.
  • Developed economies, while continuing to grow, will see their infrastructure spending shrink from nearly half of the global total today to about one-third by 2025.
  • Debt burdens have remained more stable in recent years in emerging economies, leaving more room for future government spending on infrastructure.
  • A major geographical shift in infrastructure spending, from the West to the East, is already under way and emerging Asia’s share of global infrastructure spend is set to rise from 30% in 2012 to 40% in 2018, and 48% by 2025.
  • The Asian Development Bank estimates that the Asia Pacific region needs to invest around US$8 trillion in infrastructure between 2010 and 2020 to maintain economic growth rates -- regulatory consistency could unleash more investment in the region.
  • Underlying the global economic power shift is accelerating urbanisation in many developing countries, which should result in spending growth in such infrastructure sectors as water, power, and transportation.
  • Growing per capita income in emerging markets will 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.
  • 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 according to PwC's 17th CEO Survey.
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Urbanisation and demographic shifts help define infrastructure spending

  • Demographic shifts will vary by region and country over the next decade, and will affect not only the amount of infrastructure spending, but also the types of development.
  • Growing urbanisation in emerging markets such as China, Indonesia, and Nigeria should boost spending for such vital infrastructure sectors as water, power, and transportation.
  • 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.
  • Aging populations in Western Europe and Japan will require additional healthcare facilities, while countries in Sub-Saharan Africa, the Middle East, and many parts of Asia-Pacific will need more schools for their youth.
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Sector trends serve as drivers of capital project and infrastructure spending

  • The manufacturing sector—petroleum refining, chemicals, and heavy metals-- is essential to supporting wider economic development and is expected to grow from $770 billion in 2013 to $1.9 trillion in 2025, which will represent 21.3% of global infrastructure spending.
  • Growing prosperity in emerging markets will pull infrastructure funding toward consumer-facing sectors, including developing the infrastructure needed for the manufacturing processes that provide the raw materials for consumer goods.
  • Transportation, which accounts for roughly 30% of global infrastructure spending, is projected to grow at an average annual rate of about 6% worldwide over the coming decade.
  • Because transportation infrastructure is heavily tied to government finances, there will be slower growth in many developed countries that must deal with large public debt and budget deficits.
  • The extraction sector boosted its share of the global infrastructure market to 17% in 2013, up from 14% in 2006, with most of the growth occurring in non-oil and gas extraction. Between now and 2025, the sector is expected to grow at an annual rate of 5%.
  • Extraction activity and infrastructure spending will vary across countries and regions. Buoyed by the discovery of new reserves, for example, the US, Canada, and Brazil will likely increase their share of global oil output over the coming decade, while the shares of Saudi Arabia and Russia decline.
  • Spending on utility infrastructure will be especially strong in countries that need to upgrade deficient energy, water, and sanitation services and in economies that are rapidly urbanising, such as China, the Philippines, Indonesia, Ghana, and Nigeria. The greatest growth rate for utilities spending is expected in Sub-Saharan Africa, where an annual rate of 10.4% between now and 2025 is forecast.
  • Social infrastructure, such as schools and hospitals, experienced a decline in its share of global spending, falling to 15% in 2013 from 15.9% in 2006. That was mostly because of slower growth in education investment.
  • Over the near term, spending on social infrastructure is likely to dip in some advanced economies because austerity measures will curtail government spending. Longer term, though, social infrastructure’s share of the global market should rebound as both advanced and emerging countries’ governments boost their spending.

The critical role of finance

  • The level and types of development that governments typically finance are a key determinant of future spending prospects.
  • For advanced economies, particularly in Western Europe, government debt burdens have risen to risky levels, reducing resources for future public infrastructure spending.
  • Budget constraints will shape the ability of governments to invest, and the private sector may be called upon to do more -- even in traditional public sector spaces.
  • Private investment can free up public sector budgets and also create additional public sector funds as a result of an increase in the local tax base.
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Significant global events or disruptions could clearly alter these projections

  • To realise growth over the next decade, emerging markets must ensure that they can provide the proper conditions for infrastructure development.
  • To plan, build, and maintain infrastructure, developing nations will need many more highly skilled and low-to-medium skilled workers to support design and construction activities.
  • Beyond the need for available capital and talent, growth markets will need to reduce investor risk by establishing robust governance, a consistent regulatory framework, and political stability.
  • The most expensive disasters of the past three decades have occurred in recent years and 26% of CEOs say they are addressing the risks of climate change according to PwC's 17th CEO Survey.
  • Technology is already having a deep impact on capital project delivery and cities’ infrastructure. According to PwC's 17th CEO Survey, infrastructure CEOs are planning ways to take advantage of this trend: 84% plan to improve their ability to innovate; 87% intend to change their technology investments; and 87% are exploring better ways of using and managing big data.
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