The document discusses a McKinsey Global Institute report on global infrastructure investment. Some key points: - The world spent $9.5 trillion on infrastructure in 2015, equivalent to 14% of global GDP. Real estate, social infrastructure, and transport accounted for most spending. - To support projected economic growth through 2035, an average annual investment of $3.7 trillion in economic infrastructure like roads, rail, ports, power, water and telecom will be needed, totaling $69.4 trillion. - Over half (54%) of future infrastructure needs will be in Asia, primarily China (34%) and India (8%). Two-thirds of needs will be in emerging economies.

1. DISCUSSION PAPER
IN COLLABORATION WITH
MCKINSEY’S CAPITAL PROJECTS
AND INFRASTRUCTURE PRACTICE
OCTOBER 2017
BRIDGING
INFRASTRUCTURE
GAPS
HAS THE WORLD
MADE PROGRESS?
Jonathan Woetzel | Shanghai
Nicklas Garemo | Abu Dhabi
Jan Mischke | Zurich
Priyanka Kamra | London
Rob Palter | Toronto

2. 2 McKinsey Global Institute 
Copyright © McKinsey & Company 2017
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3. 1McKinsey Global Institute 
BRIDGING INFRASTRUCTURE GAPS:
HAS THE WORLD MADE PROGRESS?
Today, the world invests nearly 14 percent of global GDP in infrastructure and real estate.
Ailing infrastructure assets, rising populations, and the demands of economic development
are driving countries’ desire to channel more funding into transport, power, and other
systems that catalyze recovery and growth.
In 2013, McKinsey Global Institute research found that the trajectory of spending would
leave countries facing major gaps in infrastructure. Despite a recent rise in investment in
economic infrastructure, gaps remain.
The world spent $9.5 trillion—14 percent of global GDP—on infrastructure
in 2015
Infrastructure-related spending (using the broadest definition that includes real estate, oil
and gas, and mining) totaled $9.5 trillion in 2015, or 14 percent of global GDP. Real estate,
social infrastructure, and transport accounted for the bulk of spending (Exhibit 1).
Exhibit 1
SOURCE: IHS; Euroconstruct; IMF; World Bank; OECD; McKinsey Global Institute analysis
Nominal investment in infrastructure, 2015
$ billion
1 The World Bank’s definition of infrastructure includes utilities (gas and electricity, water supply, telecommunications, sewerage, and waste collection and
disposal), public works (roads and major dam and canal works for irrigation and drainage), and other transport sectors (railways, ports, waterways, and
airports; OECD includes public works in a country, state or region, including roads, utility lines, and public buildings.
2 Lower water capex due to changes in the exact category definitions applied and updates to estimates by Global Water Intelligence.
NOTE: Numbers may not sum due to rounding.
Infrastructure spending by asset class, 20151
785
1,250
607
2,539
4,813
1,089
2,127 4,813
Power
236
Transport
Social
infrastructure
Water2
430Telecom
9,479
Real estate
Total
270
Oil and gas
Mining
Real estateBroader definition
of infrastructure
Economic
infrastructure
Equivalent to 14%
of 2015 global GDP

4. 2 McKinsey Global Institute Bridging infrastructure gaps: Has the world made progress?
Using the same broad definition, China was the world’s largest infrastructure market in 2015
with 38 percent of global spending, followed by North America (21 percent) and Western
Europe (17 percent). Over the past five years, the fastest-growing markets for infrastructure
spending have been India with compound annual growth in real terms of 10 percent, China
(7 percent), and North America (3 percent).
It’s not enough: $3.7 trillion a year of investment in economic infrastructure
needed to 2035
Looking more closely at the network infrastructure necessary to support economies—
roads, railways, ports, airports, power, water, and telecoms—the world needs to invest
an average of $3.7 trillion in these assets every year through 2035 in order to keep pace
with projected GDP growth (Exhibit 2). This need could increase further by up to $1 trillion
annually in order to meet the United Nations’ sustainable development goals.
Exhibit 2
Average annual need, 2017–35
SOURCE: IHS Global Insight; ITF; GWI, National Statistics; McKinsey Global Institute analysis
$ trillion, constant 2017 dollars
3.70.5
0.5
1.1
0.1
0.1
0.4
0.9
TotalRoads AirportsRail Ports Power Water Telecom
NOTE: Numbers may not sum due to rounding.
1.0 0.4 0.1 0.1 1.3 0.5 0.6Annual spending
% of GDP
4.1
Aggregate spending,
2017–35
$ trillion
18.0 7.9 1.6 2.1 20.2 9.1 10.4 69.4

5. 3McKinsey Global Institute Bridging infrastructure gaps: Has the world made progress?
The overall spend estimate has risen from $3.3 trillion to $3.7 trillion annually since our 2016
projection or $69.4 trillion total to 2035 due to an improved GDP growth outlook and a
number of technical improvements (Exhibit 3).
Exhibit 3
Aggregate infrastructure spending
SOURCE: IHS Global Insight; ITF; GWI, National Statistics; McKinsey Global Institute analysis
1 Projections now cover 19 years (2017–35) instead of 15 years (2016–30): We changed our projection period end from 2030, as used in our 2013 and 2016
reports, to 2035 to maintain a sufficiently long projection period; as a consequence, numbers are comparable to prior estimates only in percent of GDP
terms. Data is based on latest infrastructure stock data of 2015 instead of 2012; base-year prices have been updated to 2017 instead of 2015; GDP-growth
projections have increased, driving higher infrastructure needs; improved data and projections by external providers of water and telecom data.
NOTE: Numbers may not sum due to rounding.
1.3
0.43.8
0.6
0.1
2017 estimates
(2017–35)
4.1
1.0
0.5
0.1
0.1
2016 estimates
(2016–30)
1.1
0.9
0.6
0.6
0.4
0.1
29
34
6
86
67
65
44
4
22
20
12
10
7 6
100% = 69.4
2
2017 estimates
(2017–35)
2
2016 estimates
(2016–30)
49.1
By sector
% of GDP
By region
%, $ trillion, constant dollars
Power
Airports
Ports
Telecom
Roads
Water
Rail
India
Latin
America
United
States
Middle
East
Developed
Asia
Africa
China
Other
emerging
Asia
Western
Europe
Eastern
Europe

6. 4 McKinsey Global Institute Bridging infrastructure gaps: Has the world made progress?
Fifty-four percent of the world’s need will be in Asia, the bulk of this in the world’s two
fastest-growing and most populous countries. China will account for 34 percent of global
need and India 8 percent. Investment will continue to shift to emerging markets; nearly
two-thirds of global infrastructure investment in the period to 2035 is required in emerging
economies (Exhibit 4).
A number of technological disruptions will further shape those needs in ways we cannot yet
predict, like the electrification of transport infrastructure, the move to autonomous vehicles
including drones, or digitization impacting logistics and value chains.
Exhibit 4
Investment needs—economic infrastructure
SOURCE: IHS Global Insight; ITF; GWI, National Statistics; McKinsey Global Institute analysis
%, $ trillion (at constant 2017 prices)
28
34
5
45
65
4
3
6
8
22
20
15
10
13
6
3
Needed
investment,
2017–35
100% = 69.4
Historical
insfrastructure
spending, 2000–15
29.8
2
1
Western Europe
Africa
Middle East
India
United States
and Canada
Developed Asia
Latin America
Other emerging
Asia
China
Eastern Europe
NOTE: Numbers may not sum due to rounding.
63% of the
investment
need will be
in emerging
economies

7. 5McKinsey Global Institute Bridging infrastructure gaps: Has the world made progress?
There is a $5.5 trillion spending gap globally between now and 2035, with
regional variations
The world’s infrastructure investment has fallen short of investment needs, but the size of
the gap varies considerably among geographies (Exhibit 5).
Exhibit 5
The infrastructure spending gap varies widely among geographies
SOURCE: IHS Global Insight; ITF; GWI, National Statistics; McKinsey Global Institute analysis
Actual infrastructure spending,
2010–15
Gap between spending and estimated
infrastructure needs, 2017–35
2.1
2.1
2.2
2.3
2.3
2.3
2.5
3.2
3.4
3.4
3.7
4.0
4.4
4.7
5.1
5.6
8.3
Canada
Indonesia
Japan
Mexico
Turkey
Australia
South Africa
Russia
Italy
Brazil
United States
India
Saudi Arabia
China
France
United Kingdom
Germany
1 The global gap for 2017–35 as a share of GDP is calculated by adding negative values, converting to dollar terms, then dividing by cumulative world GDP.
Without adjusting for positive gap, the value is 0.10%. This has been calculated from a set of 48 countries for which data are available for all sectors. This
gap does not include additional investments needed to meet the UN Sustainable Development Goals.
NOTE: Not to scale.
Economic infrastructure
% of GDP
0.5
0.5
-0.1
0.2
1.1
0.5
1.3
-1.0
1.2
-0.2
0.3
-0.3
-1.0
0.6
-0.2
0.7
-2.5
Global gap1 = 0.3%,
or $5.5 trillion

8. 6 McKinsey Global Institute Bridging infrastructure gaps: Has the world made progress?
Australia, China, and Japan, for instance, have invested sufficiently to exceed their forecast
infrastructure requirement, and will arguably need to spend less as a share of GDP than
they have in the past. In contrast, countries including Germany, the United Kingdom, and
the United States have significant gaps between their current spending commitments
and estimated need. Reflecting the fact that the majority of demand for infrastructure is
in emerging economies, some of the biggest spending gaps are in Brazil, Indonesia, and
Mexico.
Unless these countries unlock new funding and increase their spending, they will feel the
impact of underinvestment most acutely.
Affordable housing issues exacerbate the gaps in economic infrastructure. As urban
populations expand, current trends suggest that there could be 106 million more low-
income urban households by 2025. Replacing today’s inadequate housing and building the
additional units needed would require up to $16 trillion in spending, including the costs of
land and construction. Of this, up to $3 trillion may have to come from public funding.
There appears to be progress in stepping up infrastructure investment
While a sharp decline in mining and oil and gas investment reduced overall construction-
related spending, investment in economic infrastructure rose from 2013 to 2015, most
notably in utilities.
Many G20 countries that cut back their spending on infrastructure during and after the
global financial crisis seem to have realized that there is an investment imperative, and
started to act on it (Exhibit 6). For example, member states of the European Union, in
aggregate, raised their investment by 10 percent over this period in absolute terms, notably
reflecting higher spending in Germany and Italy. Among emerging economies, India,
Indonesia, and South Africa have all raised their investment rates.
However, the United States is yet to match the level of investment that prevailed before the
financial crisis, and countries including Australia and China have cut their investment relative
to GDP—arguably a step in the right direction for their economies.

9. 7McKinsey Global Institute Bridging infrastructure gaps: Has the world made progress?
Exhibit 6
Change in infrastructure investment rate
SOURCE: IHS Global Insight; ITF; GWI, National Statistics; McKinsey Global Institute analysis
1 Does not include Croatia, Cyprus, Estonia, Latvia, Lithuania, Luxembourg, Malta, Netherlands, and Slovenia due to lack of data.
2 Data includes only power, water, and telecom sectors.
Percentage points of country or region’s GDP
Developed economies Developing economies
0.1
0.4
0.1
0.3
0.4
South
Korea
Australia
-0.3
-0.1
Italy
Japan
-0.2
European
Union1
-0.7
Germany
Canada
-0.7
United
States
France
United
Kingdom
0.2
0.5
0.1
0.2
0.2
0.2
-0.1
0
-0.5
0
0.9
1.8
0.1
1.2
0.5
0.1
-0.8
-0.1
-0.2
-0.2
South
Africa
Singapore
Argentina2
Saudi
Arabia
Turkey
Indonesia
Mexico
China
Russia
India
0
Brazil
0.2
0.5
0.2
2.2
0.6
0.2
0.2
0.9
0.1
-0.5
-0.5
Decreased Increased
2015 vs. 2008 2015 vs. 20132015 vs. 2008 2015 vs. 2013

10. 8 McKinsey Global Institute Bridging infrastructure gaps: Has the world made progress?
Efficient and effective investment is critical for closing the infrastructure gap
There is significant room to improve the effectiveness and efficiency of how infrastructure
investment is spent. Up to 38 percent of global infrastructure investment is not spent
effectively because of bottlenecks, lack of innovation, and market failures. Fact-based
project selection, streamlined delivery, and the optimization of operations and maintenance
of existing infrastructure can close this gap, reducing spending by more than $1 trillion a
year for the same amount of infrastructure delivered (Exhibit 7).
Closing the infrastructure investment gap will not be easy—but it is both necessary and
possible. Our 2016 report, Bridging global infrastructure gaps, examines how public- and
private-sector players can ramp up spending while also making better use of investment.
Improving productivity in the construction sector alone could unleash an additional
$1.6 trillion in value. Leaders of the Global Infrastructure Initiative community are engaged in
a continuing conversation about searching for new financing streams for infrastructure and
capital projects.
There has been strong recognition of the urgent investment need for many years—but being
aware of the problem is not enough. There need to be national and collective global efforts
to channel abundant liquidity into much-needed infrastructure. Countries that fail to act
today could be placing future growth, economic development, and productivity on the line.
Exhibit 7
~15
Fact-based
project selection
-38%
Infrastructure
spending
Optimized spendingMaking the most of
existing infrastructure
~8
Streamlined delivery
~15
Closing the gap will not be easy—but it is possible
SOURCE: McKinsey Global Institute analysis
%
Strong infrastructure governance and capabilities

11. 9McKinsey Global Institute Bridging infrastructure gaps: Has the world made progress?
FURTHER READING
Bridging global infrastructure gaps, McKinsey Global Institute, in collaboration
with McKinsey’s Capital Projects and Infrastructure Practice, June 2016.
Reinventing construction: A route to higher productivity, McKinsey Global
Institute, in collaboration with McKinsey’s Capital Projects and Infrastructure Practice,
February 2017.
Navigating risks in project finance, interview, McKinsey’s Capital Projects and
Infrastructure Practice, September 2017.
Improving construction productivity, McKinsey’s Capital Projects and
Infrastructure Practice, July 2017.
A blueprint for addressing the global affordable housing challenge, McKinsey
Global Institute, October 2014.
A tool kit to close California’s housing gap: 3.5 million homes by 2025, McKinsey
Global Institute, October 2016.

12. McKinsey Global Institute
October 2017
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