Global infrastructure spending on transportation, power, water and telecommunications is almost one-quarter lower than is required to keep pace with economic growth forecasts through 2030, a McKinsey & Company report has concluded.

From 2016 through 2030, the world needs to invest about 3.8% of GDP—or an average of $3.3 trillion per year (in constant 2015 prices)—in economic infrastructure to support expected rates of growth, according to the newly released report Bridging Global Infrastructure Gaps. Current rates of infrastructure investment amount to only $2.5 trillion per year, McKinsey says.

Current rates of infrastructure investment amount to only $2.5 trillion per year. Image credit: Pixabay.Current rates of infrastructure investment amount to only $2.5 trillion per year. Image credit: Pixabay.

According to the report, infrastructure investment has declined as a share of GDP in 11 of the G20 economies since the global financial crisis—including the United States, Russia, Mexico and the European Union. "Epic traffic jams, bottlenecked ports, blackouts, deteriorating dams and tainted water supplies are clear signs that the world’s infrastructure needs cannot be deferred indefinitely," the report's authors comment.

The report offers a number of recommendations for bridging these investment gaps, among them:

· Governments can increase funding streams by raising user charges, capturing property value or selling existing assets and recycling the proceeds for new infrastructure.

· Public accounting standards could be brought in line with corporate accounting so infrastructure assets are depreciated over their life cycle rather than adding to deficits during construction.

· Impediments that restrict the flow of financing from institutional investors and banks in advanced economies to projects in middle-income economies need to be addressed—from regulatory rulings on investment in infrastructure assets to the absence of an efficient market.

· Accelerating productivity growth in the construction industry can make infrastructure spending more effective. Improving project selection, delivery and management of existing assets could translate into 40% savings.

· A rigorous assessment that benchmarks each aspect of infrastructure development against global best practices can identify areas for improvement that could yield substantial results in advanced and developing economies alike.

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