Rail Baltica is an economically viable undertaking. While its projected cost has grown immensely in recent years, the high-speed rail line is expected to contribute up to 23,5 billion euros to the Baltic economies. Freight, however, is not likely to contribute much.
An independent cost-benefit analysis (CBA) found that Rail Baltica will likely add between 15,5 and 23,5 billion euros to the three Baltic economies annually, which represents between 0,5 and 0,7 percentage points of economic growth on a yearly basis. However, rail freight is expected to contribute only five per cent of the expected economic growth.
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According to the CBA, passenger transportation will contribute the vast majority of the projected benefits, at 80 per cent. By 2046, slightly more than ten million tonnes of goods are expected to be transported along the line annually, while nearly 52 million passengers will use the line. Environmental benefits make up 14 per cent of the expected benefits.
Much to gain
The CBA identified many benefits of the rail line, among which are military mobility, improved environmental sustainability, increased social equality, corridor synergies and positive impacts on supply chains.
Land value appreciation, tourism, new business development, labour productivity, competitiveness, and urban development will be the major contributing factors to economic growth as a result of the completion of Rail Baltica.
The CBA characterises the economic growth as indirect economic benefits. Besides that, Rail Baltica will likely also lead to 6,6 billion euros in direct economic benefits. This number takes into account the railway’s construction and operation over a projected period of over 70 years.
Growing costs
Rail Baltica’s costs have grown significantly over the past couple of years. Since 2017, Baltic states have incurred inflation at 40 per cent, which is reflected in the projected costs of Rail Baltica. It now stands at an estimated 15 billion for the first phase of the railway, which will connect Tallinn to Warsaw by 2030. An expansion of the scope of the project also grew the required expenditures by 31 per cent since 2017.
The Baltic states will be paying approximately 26 million euros per kilometre of tracks. This slightly supersedes the European average of 24 million euros.
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