“Romania’s infrastructure, especially transport infrastructure, is still in much need of improvement, which explains the substantial increase in roads spending in recent years. We expect road spending to continue as a priority during the European economic recovery. Aided in part by EU funding, investment in roads is forecast to continue to take the lion’s share of transportation investment, rising from $4.5 billion in 2013 to just shy of $9 billion by 2025,” said Daniel Anghel, tax partner and leader of the service team for the public sector with PwC Romania.
Romania’s heavy industrial sector looks well placed to compete against higher-cost neighbors. In fact, investment in these sectors boomed in the years running up to the country’s accession into the EU before pausing during the Eurozone crisis. Looking ahead, PwC expects investment to rebound in the chemicals, metals and fuels sectors, almost doubling from $2.3 billion in 2013 to $4.5 billion by 2025.
Social spending will likely also be a priority, with healthcare spending growing by around 0.5% a year faster than education spending as Romania’s population ages, albeit at a slower rate than in western European countries. Total social infrastructure spending is expected to reach $10 billion a year by 2025.
“In order to consolidate and accelerate its economic growth, Romania will require massive investments in infrastructure in the coming decade, in the order of tens of billions of euros. In order to finance such large investments, public authorities should take into account a wide range of financing structures – from European funds to Public-Private Partnerships. We should try to emulate the Spanish model that put to maximum use concessions for infrastructure development. We also need multiannual budgets capable of provide long term funding for ongoing infrastructure projects,” Anghel added.
Worldwide, infrastructure spending will grow from $4 trillion per year in 2012 to more than $9 trillion per year by 2025. Close to $78 trillion is expected to be spent globally between 2014 and 2025.
But there will be major differences among regions and infrastructure spending in Western Europe is not expected to reach pre-crisis levels until at least 2018. Meanwhile, emerging markets, unburdened by austerity or ailing banks, will see accelerated growth in infrastructure spending, especially China and other countries in Asia. The Asia-Pacific market, driven by China’s growth, will represent nearly 60% of global infrastructure spending by 2025. In contrast, Western Europe’s share will shrink to less than 10% from twice as much just a few years ago.
Growing urbanization in emerging markets such as China, Indonesia, and Nigeria should boost spending for such vital infrastructure sectors as water, power, and transportation.
Demographic changes will vary by region and country, affecting both the amount and type of infrastructure spending. Aging populations in Western Europe and Japan, for instance, 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.