As the global economy continues to adapt to macroeconomic shifts, infrastructure investment remains a critical driver of job creation, long-term development opportunities and resilience. While recent interest rate hikes and inflationary pressures have reshaped return expectations and complicated financing conditions, infrastructure has stood firm as a preferred asset class. With relatively stable revenues and strong government support, infrastructure investment continues to offer investors lower risk, more predictable returns, and stronger performance than other private investment opportunities.
The World Bank’s Infrastructure Monitor 2024 presents new data and insights on how global trends are shaping private investment in infrastructure.The World Bank’s Infrastructure Monitor 2024 presents new data and insights on how global trends are shaping private investment in infrastructure. It shows that while investment has continued to grow, especially in primary markets (i.e. greenfield and brownfield infrastructure as well as privatizations), disparities between regions and income levels are deepening. It also underscores that to close the investment gap, we must scale what works: targeted public support, sound regulation, and innovative financing instruments such as blended finance and guarantees.
Private Investment is Holding Steady, But Not Everywhere
In 2023, global private investment in infrastructure projects in primary markets rose notably in nominal terms, exceeding the five-year pre-pandemic average. Infrastructure delivery costs have also increased significantly necessitating a cautious interpretation of this trend. In sharp contrast, growth in emerging markets continues to lag—widening the gap between developed and emerging economies. The current pace of investment remains far from what is needed to bridge the global infrastructure gap, especially in emerging markets.
While secondary market (i.e. corporate and asset acquisition, refinancing, securitizations) activity for infrastructure increased over five-fold in the decade preceding 2022, it declined by 17% in 2023 driven by a decline in acquisitions: a reflection of the impact of higher interest rates on reducing valuations. Total capital raised by infrastructure funds also dropped by nearly half in 2023 compared to the previous year.
Why Infrastructure Stands Strong in Uncertain Times
Despite economic headwinds, infrastructure continues to appeal to investors seeking lower-risk, stable returns. Infrastructure debt, in particular, has demonstrated stronger credit performance and higher recovery rates than non-financial corporate debt. Even among non-investment-grade assets, infrastructure loans show lower default rates—a testament to the reliability of this sector.
From 2016 to 2022, infrastructure funds delivered average annual returns of 11.3%, with only a slight projected decline to 10.9% through 2028. This compares favorably to private equity and venture capital, where returns are expected to fall more steeply.
In this context, investors are concentrating their capital on low-risk strategies. Over 70% of infrastructure fund allocations are now directed toward core, core-plus, and debt strategies. Higher risk, opportunistic approaches have declined, driven by volatility and uncertainty.
The Widening Gap Between High- and Lower-Income Markets
While high-income countries (HICs) experienced nearly a 20% increase in primary market infrastructure investment in 2023, low- and middle-income countries (LMICs) saw a small decline. While preliminary estimates for 2024 shows a rebound, private capital continues to flow disproportionately to developed economies, drawn by favorable policy incentives—especially for energy transition and digital infrastructure.
Emerging markets are also increasingly reliant on a few large economies. Six countries—China, India, Brazil, Mexico, Türkiye, and Indonesia—accounted for 67% of private infrastructure investment in LMICs between 2021 and 2024. This growing concentration highlights the challenges facing smaller and lower-income markets.
Scaling What Works: Guarantees, Regulation, and Partnerships
To mobilize more private capital, especially in markets where risks are perceived to be high, we must scale the approaches that are working.
Guarantees: When guarantees are used in blended finance structures, they significantly boost the share of commercial participation. Deals with guarantees see 80% private debt participation versus 42% in those without. However, since COVID-19, the availability of cross-border guarantees has barely recovered.
Regulatory Reform: Stronger regulatory frameworks are a key enabler of private investment. World Bank analysis shows that each improvement in the regulatory environment can unlock up to $450 million in new investment.
PPIAF plays a key role in strengthening regulatory frameworks. In Serbia, its support helped shift renewable energy policy from feed-in tariffs to auctions, leading to the country’s first auction in 2023—awarding 450 MW at half the previous cost.
In Cameroon, PPIAF support helped the Port Authority of Douala (PAD) improve its creditworthiness, enabling it to raise €152 million from local banks—the largest loan in its history—and obtain long-term credit ratings for the first time.
PPIAF also supported the adoption of Cameroon’s new PPP Law in 2023, which improved oversight, risk allocation, and budget controls.
DFI and MDB Engagement: Development finance institutions and multilateral development banks play an essential role in catalyzing private capital, particularly in frontier and fragile markets. In 2023, total private mobilization by DFIs and MDBs rose 23% year-over-year.
The Global Infrastructure Facility (GIF) is enabling multi-project PPP programs across sectors. In Brazil, a GIF-supported initiative in partnership with the IFC and the Brazilian government developed a replicable model for municipal street lighting PPPs. The program includes 12 transactions expected to mobilize $180 million in private capital, delivering cleaner, safer public spaces for 7 million people and cutting energy use by 60%.
Looking Ahead: Bridging the Investment Divide
As we look forward, narrowing the infrastructure investment gap requires concerted policy action, enhanced regulatory capacity, and scaled-up use of financial innovations. The urgency is real: infrastructure is not only an economic engine, but also the foundation for expanding access to job opportunities and economic growth.
The private sector has shown it is ready to invest—but enabling environments must be strengthened to match this readiness. At the World Bank, we are committed to supporting governments and investors alike to make infrastructure financing more sustainable, inclusive, and impactful.
Only through deepening collaboration between the public and private sectors can we deliver the infrastructure the world needs.
Source : World Bank
