The COVID-19 crisis has changed the fiscal landscape for all countries, regardless of income. The International Monetary Fund estimates that an unprecedented US$11 trillion in global fiscal support has been pledged in response to the crisis so far – a number that continues to grow.
While early fiscal responses have focused on the immediate health crisis and supporting demand through the transfers system, investment in infrastructure will have a critical role to play as countries look to spur economic recovery.
This means there has never been a more important time to have strong systems and processes in place to support the delivery of quality infrastructure.
Using world-class data, the Global Infrastructure Hub’s InfraCompass 2020 shows how countries can improve their infrastructure enabling environment and highlights global examples of best practice.
Why good systems are more important than ever
Across the globe, countries are dealing with a perfect storm of retreating private capital, lower tax revenue, falling business confidence, tight credit conditions, rising unemployment and slowing or negative growth.
These conditions mean that getting infrastructure “right” is more important than ever for three reasons:
- To attract more private capital, especially as the private sector looks to reduce counterparty risk
- To deploy fiscal stimulus faster through good planning processes and efficient regulatory frameworks
- To invest public funds more efficiently with better project selection and project management
Plans matter – and there’s room for improvement
InfraCompass found that around 40% of countries lack a long-term, national infrastructure plan; around 30% do not publish a project pipeline; and 35% do not conduct market sounding before project procurement.
Highlights from InfraCompass 2020
Having pre-existing plans, pipelines and active engagement with the private sector means countries can level up their infrastructure spend faster, knowing that a lot of planning work may already have been completed.
Speed – as recent economic crises have shown us – is very much of the essence. Rapid stimulatory responses have been preferred by most governments. And while early fiscal responses to the COVID-19 crisis have focused almost exclusively on the immediate health response and supporting demand through direct transfers, we are now beginning to see some longer-term stimulus measures with infrastructure components.
For example, in May 2020 the Philippines passed a $1.5 Trillion Philippine Peso (USD 30.3 billion) infrastructure stimulus package through their House of Representatives, supported by the country’s Development Plan and Public Investment Program. This is a solid example of a long-term, cross-sectoral national infrastructure plan, which can only benefit the Filipino Government’s efforts to deploy stimulus rapidly and efficiently.
With infrastructure highlighted as critical to promoting economic recovery and resilience in the latest G20 Communiqué, we can expect to see infrastructure play an increasingly bigger role in stimulus measures going forward.
Countries should act now to be ready for the next crisis
The current COVID-19 crisis occurred just a decade after the 2009 Global Financial Crisis.
As the old saying goes, ‘the best time to plant a tree was twenty years ago. The second-best time is now’. Now is the perfect time for countries to improve the way they plan and deliver quality infrastructure, to provide greater security against the next global crisis - and InfraCompass is here to help.