2023 Infrastructure Outlook

The infrastructure sector remains resilient despite the market turmoil in 2022. Secular trends such as digitalization and decarbonization will continue to drive the need for new investments. However, macro conditions have worsened significantly. Investors can no longer count on cheap credit to boost investment returns. Looking ahead, more reflection and rigor are needed in their investment and asset management strategies to deliver positive outcomes.

2022 has been an eventful year for investors, to say the least. Issues such as high inflation, rising interest rates, geopolitical tension, political uncertainty and extreme weather events have pushed the pandemic into the rearview mirror.

Infrastructure assets have performed relatively well in 2022. Based on analyst forecasts for listed infrastructure revenues, the outlook is still relatively strong across the board, with previously underperforming industries such as toll roads and airports finally seeing strong recovery.

Oil & gas infrastructure has so far been an outlier, with robust performance due to the global energy crisis. Its sustainability is questionable though, as crude oil price is already down 30% since its peak back in March. Future markets also suggest that commodity prices will also moderate in 2023 and 2024 with increased supply growth and demand destruction.

Inflation has put private infrastructure in the spotlight, as the asset class has a reputation of being resilient in inflationary environments, given its strong pricing power and its ability to pass higher costs to customers. Its defensive nature also makes it relatively attractive compared to other asset classes during uncertain times, especially when investors are looking for safe havens.