Germany has continually invested in quality infrastructure since the country's reunification in 1990. As the water industry invested more than $122.2 billion in water infrastructure projects, the Federal Ministry of Transport and Digital Infrastructure launched the “Gigabit Initiative Germany for the Future”.
The objective is to attract more than US$111.1 billion in investment from both the private and public sectors.
A rapidly expanding German infrastructure market
As of October 2017, 189 strategic infrastructure projects were underway in Germany at all stages of development, with a total investment value of $129.6 billion. Currently, the biggest airport project is the expansion of Berlin Brandenburg Airport, valued at US$7 billion.
Based on Timetric's Infrastructure Intelligence Center (IIC), the value of Germany's infrastructure construction market grew to €55.6 billion ($61.8 billion) in 2016, up from €48 billion euros (53.3 billion dollars) in 2011. The market is expected to reach 70.3 billion euros (USA). ($78.1 billion) by 2021. The majority of projects are represented by electricity and energy projects estimated to be worth $49.1 billion.
The forecast period from 2017 to 2021 is suggested to peak at a strong pace of growth, according to the data. The main driver of growth is attributed to government spending on transport and broadband infrastructure.
$147.6 billion federal budget to support infrastructure growth
Over the next five years, alongside increased government spending on transport and broadband infrastructure, a focus on structural measures to improve access to public investment is expected to drive and sustain industry growth.
Under the FTIP (Federal Transport Infrastructure Plan) 2030, the federal government will invest US$147.6 billion in Germany's roads for the period 2016 to 2030, where US$74.4 billion will be allocated for structural and replacement infrastructure.
Germany's roads could use some work, as the country's road network fell to 16th place in the World Economic Forum's Global Competitiveness Report. Over the next few years, until 2030, 269.6 billion euros ($299.6 billion) will be invested to renew and interconnect Germany's transport infrastructure. Experts warn that the country risks being left behind if it does not invest more.
The public sector will directly finance 57.4% of the total construction projects underway, according to the CII. More German government spending on infrastructure will boost the economy and stimulate business spending.
“Government investment is a good way to stimulate demand,” said Stephen Brown, economist at Capital Economics. “(Germany) does not recognize that there could be a link… between the public sector and private sector investment.”
Germany is still a little reluctant to invest too much money in investments. As much as possible, the government wants to avoid a budget deficit. But this year, the government is much bolder with its $147.6 billion federal budget. Last year, the government invested just over 66 billion euros ($79 billion) in 2016 in roads, daycare centers, energy-efficient buildings and public transport, etc.
Private investments to support sector growth
Germany's federal government has rigorously reviewed its energy policies over the past three years. Policies are renewed in the long term and in accordance with European legislation in order to attract more private investment.
Residential boom
When it comes to residential and commercial construction, Germany is also undertaking a series of projects to respond to current supply and demand. The country's strong job market and low interest rates have cultivated economic growth and significant investment in infrastructure.
More projects, slow spending
Angela Merkel promised upgrades to internet infrastructure and speed in her campaigns. Even so, local projects, such as school improvements, are carried out through local governments. These local governments are responsible for funneling budgets into projects and often work very slowly.
“It’s up to them to spend it,” said Holger Schmieding, chief economist at Germany’s Berenberg Bank. “In a highly developed country with a lot of rules… the rate at which you can increase monetary spending is actually slow,” he said.
Progress has still been slow, although the federal government has tried to speed things up, directing more money to poorer regions with the biggest infrastructure problems.
For a complete understanding of the German construction sector, we suggest you read about how to plan and build according to German building regulations. We also have an article that discusses time and cost overruns in large-scale German construction projects. You may be interested in reading about the continuing German construction boom.
