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Western European and North American economies invest in rail, CEE countries focus on roads

Western European and North American economies invest increasingly in rail while in Central and Eastern European countries the focus continues to be on roads, shows latest study of the International Transport Forum.

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,. 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.

In Western Europe, the investment share of GDP declined steadily from 1.5% in 1975 to 1.2 % in 1980 and to 0.9% by 1995 after which it levelled off. Our latest data show that the GDP share of investment in inland transport infrastructure has been falling again since 2009 dropping to 0.7% of GDP in 2013. There are differences between countries, several showing constant above average investment shares; Switzerland (1.4%), France (1.1%), Norway, Denmark and Finland (0.9%). In contrast, whilst Italy, Ireland and Portugal all invested around 1.0% of GDP on inland transport infrastructrue prior 2008, their investment shares were only 0.2% – 0.4% in 2013. In Western European countries, the volume of investment started growing in 2002, and was 31% above the 1995 level in 2006 after which it started declining slowly. The latest data for 2013 show volume only 8% higher than the 1995 level.

inland investment

Trends for developing and transition economies differ markedly from those in developed economies. The share of investment in inland transport infrastructure in Central and Eastern European countries (CEECs), which until 2002 had remained at around 1.0% of GDP, grew sharply to 2009, reaching 2.0% (Figure 2). According to ITF recent data, investment levels have nearly halved since 2009 in real terms, accounting for only around 1.0% of GDP in 2013. This is due particularly to the fall in investment levels in the Czech Republic and Poland (investment share falling from above 2.0% to 0.6% and 0.7% respectively). The volume of infrastructure investment accelerated strongly in developing and transition economies, notably in Central and Eastern European countries after 2002. In 2009, investment in inland transport infrastructure was 290% above the 1995 level in real terms. This growth has turned negative in recent years, volume nearly halving by 2013.

In the Russian Federation, the investment share of GDP has been high compared with Western European and North American countries but volatile throughout the period.

According to ITF data for India since 2005 shows that the volume of investment in road and rail infrastructure has doubled over the period. However, due to faster growth in GDP than in investment, the GDP share of investment has declined from 1% in 2006 to 0.8% in 2013.

The share of rail investment

The share of rail investment has increased from 17% to 26% for the OECD total from 1995 to 2013, according to ITF. This trend is mainly determined by developments in Japan, North America and Europe where volume of rail investment has grown faster than spending on roads.

In the Western European countries, the share of investment in rail infrastructure has increased steadily from around 30% in 1995 to 40% in 2013. The trend observed for Western Europe is partly a reflection of political commitment to development of railways and the recent data does not seem to indicate any change in policy. Central and Eastern European countries are investing more heavily in roads. The share of roads in inland transport infrastructure investment increased from 66% in 1995 to 84% in 2005 in this region. The last few years, however, suggest a stabilisation and a possible change of the trend as the modal split of investment remained at around 2005 level until 2011, after which it declined slightly to account for 76% of total inland transport infrastructure investment in 2013.

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