Global Infrastructure Investment: Timing Is Everything (And Now Is The Time)

Standard & Poor's‏@standardpoors 

Increase of 1% of GDP spending on #infrastructure could add 730k jobs to US economy in 2015.

 

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(Editor's note: In the original version of this article, published on Jan. 13, 2015, the projected job gains listed in table 1 for Asia-Pacific countries were incorrect. A corrected version follows.)

With global infrastructure investment needs now in the tens of trillions of dollars--figures that are essentially incomprehensible to most of us--it's easy to see the problem as insurmountable. The result is that too often, we forget that even a relatively small increase in spending on infrastructure can yield outsized returns--especially if investments are executed in a wise, targeted way.

And these returns aren't just for lenders, who often enjoy lower default rates and higher yields for infrastructure projects than they might reap from similarly rated corporate debt--especially in developed markets. Economies will also generally benefit from the so-called "multiplier effect" when they promote such investments, with each dollar of spending (again, when deployed judiciously) translating into much greater gains in terms of GDP.

Overview

• Standard & Poor's sees clear economic benefits to G20 countries' increased public spending on infrastructure--with the so-called "multiplier effect" of an increase in spending of 1% of real GDP running as high as 2.5 in a three-year period.
• The multiplier effect is generally greater in developing economies than for more developed countries; for example, China, India, and Brazil would all enjoy a boost to GDP of at least double the increase in investment.
• For Europe, it's clear that a concerted effort across the region would have a greater effect than country-specific increases in spending.
• For developed nations, the increase would boost employment substantially--adding more than 700,000 jobs in the U.S. and about a million in the EU.

 

Source: Global Infrastructure Investment: Timing Is Everything (And Now Is The Time)

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