Now is the perfect time for an infrastructure push in emerging markets and developing economies to sustain their growth, stimulate business activity, and create jobs, finds a new study released in the IMF’s October 2014 World Economic Outlook.
In the current global environment of sub-par growth, there is a strong case for increasing public investment in infrastructure in countries where conditions are right, said the study, as it noted how “infrastructure bottlenecks are putting a brake on how quickly these economies can grow.”
Continued the study: “Infrastructure is the backbone of everyday life, underpinning economic activity. There is no activity that does not rely on infrastructure in some form. Conversely, inadequacies in infrastructure are quickly felt—power outages, insufficient water supply, and decrepit roads adversely affect people’s quality of life and present significant barriers to the operation of firms.”
The study finds that increased public infrastructure investment raises output in the short term by boosting demand and in the long term by raising the economy’s productive capacity.
“For economies with clearly identified infrastructure needs and efficient public investment processes and where there is economic slack, there is a strong case for stepping up public investment,” it added.
The report suggests increasing the efficiency of public investment to reap its full benefits by improving the public investment process through better project appraisal, selection, execution, and rigorous cost-benefit analysis.
Photo: Andreasstolz
