Infrastructure in Greece
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Infrastructure in Greece Funding the future October 2020 Content overview 1 Executive 2 Infrastructure summary investment The investment gap in Greek 3 Greek 4 Funding of infrastructure infrastructure Greek projects infrastructure is about pipeline projects 5 Conclusion 6 Appendices 0.8pp of GDP Infrastructure in Greece 2019 October 2020 PwC 2 1 Executive summary Executive Summary (1/2) Funding the future • Global infrastructure needs are expected to reach around € 43.4bn total infrastructure budget $ 77trln by 2040 Infrastructure work in progress and upcoming projects • Greece ranks 37th globally and 18th among the EU countries in terms of infrastructure quality • There is an infrastructure investment gap of about 0.8pp of GDP (against the European average) translating into an average spending shortage of € 1.5bn per year Waste Management Rail • Infrastructure investments have an economic multiplier of 1.8x, 3.6% which boosts demand across the economy 7.7% Urban Rail • The infrastructure pipeline, i.e. projects in progress or prepared but not yet funded, amounts to 118 projects with a budget of 12.3% € 43.4bn • The pipeline is higher than in the past due to addition of new high cost projects in the preparation phase 58.4% 13.8% Energy • € 25.4bn of the budget refers to Energy projects, while € 8.7bn Motorways to Railways and € 6bn to Motorways. Tourist infrastructure and Waste management projects account for a small part of the 4.2% remaining budget taking up only about € 1.8bn and € 1.6bn Tourism Infrastructure respectively • The infrastructure pipeline is concentrated (58%) on energy interconnection and generation Source: Press, PwC calculations October 2020 PwC 4 Executive Summary (2/2) • The current project portfolio is heavy on energy and transport but short on connectivity, tourism and the Estimated Completion year (cumulative) environment Number of projects • Investment on tourist product upgrading, as well as water and waste management have a significant impact on the development and improvement of the life quality • The majority of the infrastructure projects are behind the Planned starting line, either in the maturity phase or the bidding In progress 63 64 and contracting stage 61 57 • Only 37 projects are in the construction phase, while 81 51 are in the designing phase, with 54 of them not having a 27 24 26 start/completion date 21 54 projects are • The majority of the infrastructure projects funded by the 20 in early design NSRF are not completed yet, despite the fact that we phase with no are reaching the end of the current period, with the level announced 26 of payments still at very low levels 54 commencement 3 • In order to accelerate the infrastructure projects in the 20 and completion 1 dates yet following years, the private sector’s contribution could be 36 37 37 37 31 actively used, through the mechanism of unsolicited 8 23 19 proposals and the creation of the correct institutional 0 framework 8 0 2020 2021 2022 2023 2024 2025 2026 2030 N/A Source: Press, PwC calculations October 2020 PwC 5 2 Infrastructure investment Definition of infrastructure • “Infrastructure is the system of public works in a country, state or region, including roads, utility lines and public buildings” OECD • “Infrastructure is “the basic framework for delivering energy, transport, water & sanitation and information & communication technology (ICT) services to people affecting directly or indirectly their lives” World Bank In the study, we have included projects with regards to transport (airport, ports, roads & rail), energy (electricity, oil & gas) as well as water & sewage, whilst ICT and Social Infrastructure (e.g. Hospitals, Schools, Public Buildings, Sport Structures and Green Areas) have been excluded Information & Communications Technology, according to the World Bank, refers to physical telecommunications systems and networks (cellar, broadcast, cable, satellite, postal) and the services that utilize them (internet, voice, mail, radio, and television) October 2020 PwC 7 Global Megatrends 11 Megatrends have emerged as the main challenges that will affect both growth models and way of living in the future The 11 Megatrends Investments in Infrastructure Megatrends are 1. Ageing of population • Urban Transport Infrastructure defined as the long- o urban rail lines term and irreversible 2. Urbanization o urban roads processes that will • Waste Management Infrastructure 3. Diseases transmission affect specific sectors • Transport infrastructure at Technological change as well as the realm of 4. national level o road & rail network public policy 5. Sustainable economic growth o ports o airports 6. Global competition for resources • Interconnection of Infrastructure 7. Emergence of new economic powers & Transportation Network and integration in the new global trade flows 8. Growing pressure on ecosystems • Energy Infrastructure 9. Climate change o gas distribution & storage network o RES 10. Environmental pollution o island & mainland electricity interconnection 11. Diversifying approaches to governance Source: Τhe European Environment, State and Outlook 2015, Assessment of Global Megatrends October 2020 PwC 8 Global infrastructure could require up to $ 77trln of investment by 2040 In the period 2019-2040, 3.2% of global GDP Traditional funding sources are no longer needs to be invested in water infrastructure, road enough to cover the rapid increase in & rail transportation, airports and ports, energy infrastructure projects, which are expected to reach $ 3.5trln p.a. until 2040 Road 31.6 Rail Airports & Ports 3.2% 10.6 4.6 Transport 1.9% 76.9 1.1% 45.3 0.2% 25.8 5.8 Water/Waste Transport Energy Total Management Infrastructure needs ($trln) % of Global GDP Source: Global Infrastructure Outlook, Oxford Economics October 2020 PwC 9 Infrastructure extent and quality index Greece ranks low relatively to its global peers Infrastructure index (scale:0-100*) The infrastructure index captures the quality Greece and extent of transport and utility infrastructure 97 100 97 91 91 Transport Infrastructure 78 I. Road 78 7755 68 • Quality of road network 68 6161 • Quality of road infrastructure II. Rail 39 • Railroad density 39 • Efficiency of train services III. Air • Airport connectivity • Efficiency of transport services IV. Sea 0 • Shipping connectivity*** Total Roads Railroads Air Transport Water Trasnport Electricity Water • Efficiency of seaport services Infrastructure Utility infrastructure Source: The Global Competitiveness Report 2019 I. Electricity * Indices are expressed on a 0 to 100 scale and are interpreted as “progress scores”, indicating how close a country is to the ideal state • Electricity access • Electricity quality Ranking in infrastructure (141 countries) II. Water • Exposure to unsafe drinking water Best • Reliability of water supply performer Singapore Singapore Japan Japan Singapore 9 countries** Iceland (1st) *** Για τις χώρες που περιβάλλονται από ξηρά, αυτός ο δείκτης δεν *** For landlocked countries, this indicator is not included in the Ελλάδα th st st th th rd th περιλαμβάνεται στον υπολογισμό και η βαθμολογία των 37 51 51 26 26 33 37 computation and the Sea component score only corresponds to Θαλάσσιων υποδομών αντιστοιχεί μόνο στη βαθμολογία της the score of “Efficiency of seaport services” «Αποδοτικότητας λιμενικών υπηρεσιών» OctoberΜάιος 20202020 ** Bahrain, Chile, Finland, Hong Kong, Iceland, South Korea, Luxembourg, PwC 1010 Singapore, Taiwan There are two statistically distinct levels of infrastructure extent and quality, whose difference cannot be explained by the level of GDP 100 Greece ranks 37th globally and 18th among the EU 98 Group 1 countries in terms of infrastructure, revealing also a 96 quality gap for the current level of GDP per capita 94 Netherlands 92 Spain France 90 Germany The differences in In Greece, the average Austria 88 United KingdomBelgium infrastructure extent and infrastructure investment Denmark Infrastructure Index 2019 Index Infrastructure quality between Western level during 2009-2019 86 FinlandSweden and Northern European corresponded to only 14% 84 Italy Czech Republic countries, compared to the of GDP, lowest among all 82 Quality gap Poland Central and Eastern E.U. countries, Hungary 80 Slovakia European countries, cannot undermining country’s Slovenia 78 Croatia be explained by the level of upcoming infrastructure Greece Lithuania Ireland 76 Estonia relative investment quality Latvia 74 Infrastructure investments, 72 measured through the Gross Romania Group 2 Fixed Capital Formation 70 Bulgaria (GFCF), appear to have a 68 different impact on 10% 15% 20% 25% 30% 35% 40% 45% infrastructure quality in Gross Fixed Capital Formation / GDP each group Source: World Economic Forum - The Global Competitiveness Report 2019, Fitch Infrastructure in Greece 2019 October 2020 PwC 11 There is a systematic investment gap of 0.8pps of GDP (or ca. € 1.5bn p.a.) in Greek infrastructure over the past 10 years Infrastructure investment* Infrastructure in Greece has The erosion of infrastructure been severely affected by the investment from 2009 to 2019 resulted EU avg.(2009-2019): 1.9% deep recession. Total value in a € 13bn permanent shortage** 3.1 € 13.2bn investment shortage between 2009-2019 of infrastructure projects against the EU average has decreased by as much 2.6 as 31% after 2009 but has The infrastructure investment gap is 2.2 rebounded since between 0.8 pp of GDP (against the 1.3% 2.1 2.1 2.1 2.1 2.0 2.0 2.0 2.0 Greek avg European average) or 1.9 pp of GDP (2009-2019) 1.2%