Railways Gaining Traction Despite Budget Constraints
Two significant announcements on railway projects in France support our medium-term optimistic outlook for the sector. Seeing slow but steady progress in these projects is a positive sign for the industry, especially in the context of France's macroeconomic outlook. Our Country Risk team is forecasting a contraction of 0.3% in real GDP growth for 2013, which is a significant impediment to any recovery in the construction sector.
However, we are more optimistic on France's railway sector and we currently forecast annual average real growth at 8.1% year-on-year (y-o-y) over our forecast period to 2022, with railways outperforming other segments. This is particularly significant as the railway sector accounts for more than 60% of France's total infrastructure industry value. Despite our view that France's broader economic performance could weigh heavily on project financing, support from the European Investment Bank (EIB) is likely to see these projects through to completion.
The first announcement refers to the approval of a EUR300mn loan from the EIB to partly finance the upgrade of the Lille metro system. Thirty years after it was opened, Lille's metro will benefit from the modernisation of its driving system in addition to the purchase of new trains and equipment. This is part of a EUR610mn project to double public transport capacity by 2020.
|Railways To Drive Transport Infrastructure Growth|
|France Railways Industry Value (EURbn) And Real Growth %|