Expansion of Infrastructure Investment for Sustainable Economic Growth
Publication Date 2025-10-20
Researchers Keun-Yong Eom
The domestic economic situation and regional situation were analyzed, the necessity and effectiveness of infrastructure investment were reviewed, and accordingly, the direction of infrastructure investment and financial resources were derived.
- In the domestic economy, a decrease in construction investment leads to a contraction in consumption, economic growth is expected to slow down to 0% in 2025, and growth is expected to continue in the mid- to long-term.
- The regional economic slowdown is even more serious as local population declines, population movements continue to occur to the metropolitan area, and capital outflow to the metropolitan area is also expanding. In addition, local life SOC has improved due to the promotion of balanced national development policies, but it is still insufficient compared to the metropolitan area.
- In addition, aging infrastructure is increasing rapidly amid increased precipitation and increased frequency of earthquakes due to climate change.
- Infrastructure investment greatly contributes to inducing a virtuous economic cycle, strengthening productivity, and balanced regional development, and directly affects the safety and quality of life of the people.
- Major developed countries such as the United States, the United Kingdom, and the European Union have approached it as a strategy to simultaneously pursue economic stimulus and future competitiveness through infrastructure investment.
- The analysis of the appropriate SOC investment size based on the endogenous growth model may be overinvested compared to the appropriate size due to a decrease in demand due to economic contraction in the short term, but it is analyzed that about 500 billion won per year is insufficient than the investment forecast when considering the achievement of the economic growth target.
- Meanwhile, maintenance costs are expected to continue to increase due to the increase in aging infrastructure, and maintenance of national and local government management facilities is estimated to reach 1,000 trillion won from 2021 to 2050.
It is estimated that in 2040, maintenance costs will be required at the current SOC budget of around 25 trillion won.
- Accordingly, it is necessary to prepare financial resources for maintenance costs of old infrastructure and investment in new infrastructure at a certain level, and to this end, it is suggested to supplement financial investment by revitalizing private investment projects, along with expanding tax sources of transportation, energy, and environmental taxes, and mandatory accumulation of performance improvement provisions.
Although the expansion of transportation, energy, and environmental taxes is not large, it is expected to improve from the present through the use of private investment projects and adjustment of the size of facilities to be invested.
Accumulation of performance improvement provisions is expected to reduce maintenance costs in the long run by extending the period of use through performance improvement before the infrastructure degrades.
- Finally, this paper presents three major directions for infrastructure investment.
First, it is suggested that the scale of SOC investment needs to be expanded to transition from the current economic cycle structure to the economic cycle structure.
Second, it is suggested that active utilization through the revitalization of private investment projects is necessary to supplement regional balance and fiscal investment.
Third, in order to improve the safety and quality of life of the people, it is proposed to improve old infrastructure, improve local settlement conditions, and create an environment that can promote local consumption of residents in the metropolitan area.