Global infrastructure spending to rise

Date: January 17, 2007

Source: KHL's World Construction Week

Spending on infrastructure in emerging markets could exceed US$ 1 trillion in the next three years, according to a report by Merrill Lynch.

In its recent Global Research Highlights, it said more money was becoming available following the decision by investment banks such as the European Bank for Reconstruction and Development and the Inter-American Development Bank, to boost their activity in the sector.

The new estimate, up from Merrill Lynch’s previous figure of US$ 705 billion, was based on higher spending forecasts for China and the emergence of new sources of spending in Russia and the Middle East, particularly the GCC (Gulf Cooperation Council) countries.

The report said that, Vast domestic savings in the developing world are finally being mobilised for investment in infrastructure projects to enhance growth potential. Infrastructure and consumer spending represent the best secular investment themes in the emerging markets, in our judgment.

The key drivers of the new wave of investment in infrastructure are the previous under investment in the sector, the need to improve access to global markets, alleviate poverty, ease congestion and increase cross border transport routes and improve inter-modal transport hubs, said the report.

The report also noted the substantial progress made in lowering inflation in emerging markets in recent years. This was coupled with dramatic increases in urban populations throughout the developing world and improved sources of funding, which had resulted in substantial improvement in budget balances, current account surpluses, oil revenues, economic growth and foreign exchange reserves.

The report said infrastructure spending has the potential to boost earnings in a number of sectors, including telecom, power and energy, transportation, natural resources, water, sanitation and environmental services, and engineering and construction.

It forecasts that China will become the biggest spender, making up just over 30% of the total, followed by Russia, the Gulf states - United Arab Emirates, (UAE), Kuwait, Qatar and Bahrain - and India.

Posted by izoiopoulos at January 19, 2007 12:35 PM