## How a Collective Infrastructure Push Will Boost Global Growth

_IMF Blog, November 24, 2020_

## Source details

**Canonical URL:** [How a Collective Infrastructure Push Will Boost Global Growth](https://www.imf.org/en/blogs/articles/2020/11/24/how-a-collective-infrastructure-push-will-boost-global-growth)

## Other formats

- [Markdown version](/en/blogs/articles/2020/11/24/how-a-collective-infrastructure-push-will-boost-global-growth/index.md)
- [Structured JSON version](/en/blogs/articles/2020/11/24/how-a-collective-infrastructure-push-will-boost-global-growth/index.json)
- [Bundle manifest](/en/blogs/articles/2020/11/24/how-a-collective-infrastructure-push-will-boost-global-growth/bundle-manifest.json)

## Bibliographic details
- Authors: The Editors
- Published: November 24, 2020

---

### Overview
- With vaccines around the corner, cooperative efforts remain critical to produce and distribute vaccines globally, tackle climate change, and bolster the economic recovery from the crisis.
- An IMF report published ahead of the G20 leaders meeting argues a synchronized infrastructure investment push could invigorate growth, limit scarring, and address climate goals by generating cross-border demand “spillovers.”

### Mechanism of spillovers and macro context
- Public infrastructure investment can lift domestic growth and raise demand abroad through trade linkages, producing positive “spillover” effects that boost global output.
- Spillovers from higher demand are particularly impactful when economic conditions are weak and interest rates low:
  - When conditions are weak and inflation is well below target, monetary policy is less likely to tighten in response to higher government spending, so output responses are larger.
  - When economic conditions are strong, higher government spending may push inflation above central bank targets and trigger monetary policy tightening, offsetting some of the demand boost.
- The presence of ample spare capacity amplifies the impact of both domestic public infrastructure spending and demand that spills over from higher public investment abroad.

### Quantitative scenarios and key statistics
- Scenario for economies with room to spend:
  - Increase infrastructure investment spending by ½ percent of GDP in 2021.
  - Raise it to 1 percent of GDP in 2022.
  - Keep it at that level until 2025.
- Scenario for economies with less fiscal space:
  - Spend about one third of the amounts above over the same period.
- Projected global output effects:
  - Global output could increase by close to 2 percent by 2025 (dashed black line).
  - About a third of that impact would come from cross-border spillovers.
  - If each country raises infrastructure spending on its own (without higher spending abroad), the global impact would on average be about 1.2 percent (solid black line).
- Bottom line metric:
  - If G20 countries act together, they can achieve two-thirds more at the same cost than if each country acts alone.

### Types of infrastructure with important additional benefits
- Prioritizing green investments strengthens resilience and supports a cleaner world for the next generation.
- Examples of high-impact green and resilient projects:
  - Efficient mass transit projects.
  - Smart electricity grids.
  - Retrofitting of buildings to enhance energy efficiency.
- Job-intensive public investment such as infrastructure maintenance or public works, if implemented efficiently, is also important.

### Policy implications and recommendations
- Coordinated action across countries magnifies individual policy impacts via spillovers and delivers larger global gains for the same fiscal cost.
- Policymakers should:
  - Implement high-quality, smart spending on infrastructure.
  - Prioritize green and resilience-enhancing projects.
  - Focus on efficient, job-intensive public investment where possible.
- Cross-country cooperation in timing and targeting infrastructure investment can amplify benefits and provide further support for all economies.

*Based on research by Jared Bebee, Oya Celasun, Lone Christiansen, Ashique Habib, Ben Hunt, Margaux MacDonald, and Rafael Portillo.*

---


## References

- [عربي](https://www.imf.org/ar/News/Articles/2020/11/19/blog-continued-strong-policy-action-to-combat-uncertainty)
- [日本語](https://www.imf.org/ja/News/Articles/2020/11/24/blog-how-a-collective-infrastructure-push-will-boost-global-growth)
- [Português](https://www.imf.org/pt/News/Articles/2020/11/24/blog-how-a-collective-infrastructure-push-will-boost-global-growth)
- [IMF report](https://www.imf.org/external/np/g20/111920.htm)

_Source: https://www.imf.org/en/blogs/articles/2020/11/24/how-a-collective-infrastructure-push-will-boost-global-growth_