Future global economic growth is expected to drive investment in port projects, says a recent report by GlobalData.

According to the World Trade Organization (WTO), global trade declined by 1.2% year on year (YoY) in 2023 owing to geopolitical and economic turmoil, coupled with the Red Sea disruptions, which further aggravated the trade situation.

In 2023, the value of global merchandise trade in current US dollar terms fell by 5% YoY, partly due to falling commodity prices, such as oil and gas, and increased shipping costs due to Suez Canal disruptions.

The long-term outlook is positive, with the WTO projecting merchandise trade volume to grow by 2.6% in 2024 and 3.3% in 2025. The International Monetary Fund (IMF) and logistics companies, such as DHL, are predicting that trade will expand its role in the global economy over the next five to ten years.

This is likely to drive investment in port infrastructure, particularly in emerging markets that will benefit from changing trade patterns. The IMF predicts that South-East Asia, South Asia, and Sub-Saharan Africa will be central to future trade growth. It expects that China’s influence on global trade growth will wane as trade becomes more diversified across many countries.

Due to the importance of global trade integration to economic growth and development, investment in ports in these regions in the short to medium term will be crucial for future prosperity. However, owing to heavy reliance on dollar-dominated debt and foreign investment, the current macroeconomic environment poses several downside risks.

Rising interest rates, greater commitment to domestic spending in many advanced economies due to cost-of-living crises, as well as geopolitical unrest are likely to hit investment levels in emerging markets over the coming quarters. Greater investment in port infrastructure is also expected to be needed in advanced economies over the coming years due to rising long term demand and in response to the inefficiencies experienced at ports in recent years which led to bottlenecking and severe disruptions.

GlobalData is tracking port construction projects globally, from the early pre-planning stages (of announcement and study) through to execution, with a combined value of $479.6bn. The largest overall pipeline is in South-East Asia, totaling $85.1bn, of which $51.4bn is already in the execution stage.

The pipeline of projects in South Asia is relatively less mature, with 39.6% of the projects by value now in the execution stage. The value of projects being tracked in Middle East and North Africa (Mena) stands at $69.3bn, with 87.4% of projects in the execution stage.

The global pipeline is dominated by projects in the late stages of development, with two-thirds of projects either in the pre-execution or execution stage, amounting to $316.1bn in total value. Of this amount, $238.9bn is in the execution stage and $77.2bn is in the pre-execution stages (comprising design, tender and award).

Projects in the early stages account for a relatively small share with 34.1% of the pipeline by value reflecting projects in the pre-planning and planning stages. Assuming all projects proceed as planned and that spending is evenly distributed over the construction phase of all projects, annual spending on the global port projects pipeline could reach to $8bn in 2024 and $7.5bn in 2025.