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OECD reports “record low” investment in inland transport infrastructure

PARIS, Fra.–The latest update of annual transport infrastructure investment and maintenance data collected by the International Transport Forum at the OECD shows that continued economic crisis has had an impact on transport infrastructure investment.

Investment in inland transport infrastructure, as a share of GDP, has declined from a peak in 2009 to a record low (0.8%) in the OECD while the volume of investment has fallen back to 1995 levels, said an OECD release.

Investment levels in Central and Eastern European countries have nearly halved since 2009 in real terms, accounting for 1% of GDP in 2013 (compared with 1.9% in 2009).

Western European and North American economies invest increasingly in rail while in Central and Eastern European countries the focus continues to be on roads. The most recent data on investment show that gross fixed capital formation (investment) in inland transport infrastructure as a percentage of Gross Domestic Product (GDP) has declined to below 0.8% for the OECD, the lowest figure over the period since 1995 for data has been reported.

Part of the decline can be contributed to Japan (its economy being large enough to affect the overall average), which followed a different trajectory from the rest of the OECD before 2007. Japan’s expenditures were affected by general budget cuts towards the end of the 1990’s. Subsequently, modification of the allocation of revenues from gasoline tax, earlier earmarked for highway development and maintenance, reduced the level of investment in roads in Japan.

However, the most recent data suggest that the continued economic crisis has resulted in a broader decline in transport infrastructrue spending, measured in real terms, across many OECD countries. This declining trend was temporarly reversed in 2009 by stimulus spending. The volume of investment (expenditure in real terms) in the OECD as a whole grew 16% from 1995 to 2002 after which it remained relatively stable until 2009. The impact of stimulus spending is visible in 2009 but the recent data show volume falling back to 1995 levels.

In North America, GDP share of investment has remained around 0.6% over the period (Figure 2). The volume of inland infrastructure investment in North America grew by around 30% from 1995 to 2002. The latest data suggests a slow decline in investment volume continuing all the way to 2013, although temporarily reversed by stimulus spending in 2009 and 2010.

The investment needs for transport infrastructure depend on a number of factors, such as the quality and age of the existing infrastructure, geography of the country (including exposure to geological and meteorological risks) and transport-intensity of the country’s productive sector. The fact that the share of GDP dedicated to transport infrastructure has tended to remain constant (and decline more recently) in many countries suggests investment levels are affected also by factors other than real investment needs, such as institutional budget allocation procedures or budgetary constraints. The impact of government policy can also be identified, as for example Australia and Canada where the share of inland infrastructure investment in GDP has remained relatively high, above 1.0%, partly as a result of long-term political commitment for transport infrastructure spending, said the OECD report.