A decline in infrastructure spending over the last 30 years needs to be reversed to boost growth, according to the International Monetary Fund, which meets next week in Washington against a backdrop of slowing global growth.
The IMF said the benefits of debt-financed infrastructure projects could give an important boost to economic growth especially when the world is threatened by a long period of stagnation.
In documents released before its revised economic outlook, it urged governments to examine where infrastructure investments could benefit longer-term growth.
It said: “Debt-financed projects could have large output effects without increasing the debt-to-GDP ratio, if clearly identified needs are met through efficient investment. In other words, public infrastructure investment could pay for itself if done correctly.”
The report singles out the US and Germany as in need of large-scale infrastructure investment following a stream of critical reports from the business community over the upkeep of road and rail networks.
It says the US needs to act to arrest the decline in its network of roads.
“As the American Society of Civil Engineers notes, 32% of major roads in the US are now in poor or mediocre condition, and the US Federal Highway Administration estimates that between $124bn [£76bn] and $146bn annually in capital investment will be needed for substantial improvement in conditions and performance – considerably more than the $100bn spent on capital improvements at all government levels,” it said.
George Osborne is likely to take some comfort from the analysis, which brackets the UK with Canada, Italy, France and Japan as having an improving level of infrastructure, “albeit from relatively low levels”.
The IMF, which acts as lender of last resort to struggling countries, has been a keen supporter of infrastructure investment since the financial crash as a way to boost employment and increase productivity. Better roads and rail, digital infrastructure and power networks support local businesses and help them increase output at lower costs.
via The Guardian
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Alfonso Esparza
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
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