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News from Members Romania’s Infrastructure Spending to Grow by 5% per Year Between 2013 and 2025, According to PwC and Oxford Economics Report

Romania’s Infrastructure Spending to Grow by 5% per Year Between 2013 and 2025, According to PwC and Oxford Economics Report

by PwC September 2, 2014

Romania’s infrastructure spending will grow on average by 5% per year between 2013 and 2025—faster than growth in Western Europe, but slower than the global average, with the infrastructure market reaching around $30bn by 2025, according to PwC’s and Oxford Economics report Capital project and infrastructure spending: Outlook to 2025.

“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 forecasted to continue to take the lion’s share of transportation investment, rising from $4.5bn in 2013 to just shy of $9bn by 2025”, stated Daniel Anghel, Tax Partner, Leader of the Service Team for the Public Sector, PwC Romania.

Romania’s heavy industrial sector looks well placed to compete against higher-cost neighbours. 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 $2.3bn in 2013 to $4.5bn 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 $10bn 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”, added Daniel Anghel.

Worldwide, infrastructure spending will grow from $4trn per year in 2012 to more than $9trn per year by 2025. Close to $78trn is expected to be spent globally between 2014 and 2025.

But there will be major differences amongst region, with infrastructure spending in Western Europe not reaching 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.

About the report

The research analyzes capital projects and infrastructure spending across 49 of the world’s largest economies across six continents. It estimates the scale of current infrastructure investment and assesses the prospects for future investment from now to 2025. The report findings show the shift in economic weight from West to East as well as the real possibility that many advanced Western European economies may fall behind their competitors in this key sphere.

The definition of infrastructure is wide-ranging, taking in a number of broad sectorial groupings and economic activities. The reports covers the sectors traditionally classified as infrastructure such as transportation and utilities, but also look at a number of the key manufacturing and primary activities that enable transportation and utilities sectors to develop and operate. The report also looks at sectors that supply households with essential human services such as education and health, or social infrastructure.

About PwC

PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 157 countries with more than 184,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.ro

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