Publication: New Private Infrastructure Projects in Developing Countries Have Started Being Affected by the Financial Crisis
Date
2008-12
ISSN
Published
2008-12
Author(s)
Izaguirre, Ada Karina
Abstract
New private activity continued to take
place in developing countries in Aug-Nov 2008 with projects
being developed, tendered, and taken to financial close, but
at a rate that was about 40 percent lower than in the same
period in 2007. The slowdown reflects an initial impact of
the financial crisis which has made financing more onerous
and difficult to secure as access to capital markets and
bank lending has been reduced or halted and risk perception
increased. Projects are facing higher cost of financing, but
the major impact to date is project being delayed or
cancelled. It is, however, too early to assess the full
impact of the crisis on new Public-Private Investment (PPI)
projects. Many investors and financiers are in a
wait-and-see mindset and are likely to be so for the next 3
to 6 months or until the breadth and depth of the crisis
impact become clearer. When financial markets bottom out or
start to recover, project financing levels are likely to
remain impacted over a significant period of time if the
trends shown in previous financial crises are repeated. As
the "flight to quality" sets in for banks and
other financiers, the likely impact will be more stringent
financial conditions, not only via higher cost of financing
but also with lower debt/equity ratios and more conservative
structures. The expected economic downturn in developed and
developing countries is also likely to reduce demand levels
and have a significant impact on project revenues, and
consequently on projects' financial viability.
Citation
“Izaguirre, Ada Karina. 2008. New Private Infrastructure Projects in Developing Countries Have Started Being Affected by the Financial Crisis. PPI Data Update; Note No. 20. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/70358449-56f6-51d3-9842-86f099a5eb53 License: CC BY 3.0 IGO.”