US transportation infra sector healthy, Fitch says

Despite growing interest, PPP growth is held back by political constraints, the ratings agency cautions.

The US is expected to see healthy performance and moderate growth in the transportation sector in the second half of the year and into early 2018, according to a mid-year report from Fitch Ratings.

But potential for PPPs is being held back by a “scarcity of funding resources, long regulatory approval processes and lack of PPP education”, the report notes. This is despite a growing number of state and local governments exploring the model and with a modest pipeline of such projects seen over the medium term, traditional financing models are expected to predominate, said Fitch.

In the sector overall, growth is expected to mirror GDP growth, according to the report, with low fuel prices keeping travel costs down. But longer-term forecasting is less certain due to potential US policy changes. Also, while interest rate hikes are expected in the next few years, high ratings and fixed-rate debt in the sector will limit their impact, Fitch noted.

The ratings agency also expects port volume to follow GDP growth for the rest of 2017, though future trends could be affected by changes to trade policy. In the airport sector, passenger traffic is expected to grow between 2 percent to 2.5 percent, down slightly from last year.

“Capital programmes and associated borrowings are areas of caution with private partnerships gaining momentum,” Fitch noted.

And while traffic growth on toll roads will also follow moderate economic gains, toll increases could help boost revenue: “The sector continues to face political risk, including federal funding uncertainty and state tolling opposition,” according to the report.