The Asian infrastructure financing market continues to be impacted by rising geopolitical issues, market volatility and skepticism about globalization. In 2019, the Asian infrastructure finance market saw a reduction in investment in infrastructure financing but the pressing need for infrastructure financing in Asia still holds strong. Key near-term trends that shaped the Asian infrastructure finance market include:

• Decline in private sector financing activity.
• Slowdown is attributed mostly to global macroeconomic uncertainty, localized challenges and election cycles in key markets.
• Transition from conventional to renewable energy.
• Targets set by Asian governments are also supportive of boosting renewable energy generation in the region.
• Limited capital availability.
• Need for Asian countries to diversify away from bank lending into alternative lending sources.

When this report was being prepared in late 2019 and early 2020, it was not anticipated that COVID-19 would become a global pandemic. Interviewed market participants were initially very positive about infrastructure prospects in 2020, notwithstanding the market difficulties faced in 2019. Since then, the pandemic has caused a significant disruption in the global economy, which will likely lead to a global recession in 2020. AIIB expects infrastructure financing to be highly subdued the first half of 2020, given the disruptions to economic activity, supply-chains and financial markets. Nevertheless, once the worst of the pandemic is over, infrastructure development is expected to recover strongly in line with the significant underlying demand, as well as new priorities arising from the crisis (Please see “COVID-19 and Implications on Infrastructure Priorities”).