European Central Bank, (2016), “Business investment developments in the euro area since the crisis”, ECB Publications, 31 October
Business investment is both an important driver of the business cycle and a determinant of future growth prospects. While recovering less than in other advanced economies, the ratio of euro area real business investment to value added has recently surpassed its historical average. The recovery in investment is being driven by a combination of improving demand, profit expectations and financing conditions, as well as declining uncertainty. However, weak absolute investment growth in the euro area has slowed growth of the capital stock, which has weighed on potential and productivity growth since the crisis. Moreover, euro area gross corporate debt remains historically high and several regulatory and institutional factors continue to drag on business investment, despite a number of reforms in recent years. At this stage, policies aimed at improving the regulatory environment and credit conditions, reducing entry barriers, increasing the overall flexibility of labour and product markets and providing an efficient debt restructuring framework are particularly important for fostering investment. Finally, targeted and efficient infrastructure investment can support business investment.
Relevant Posts
- Bluedorn, John C., Ebeke, Christian, (2016), “Sluggish Business Investment in the Euro Area: The Roles of Small and Medium Enterprises and Debt”, iMF-direct, 4 August
- Eurostat/Business investment rate up to 22.2% in the euro area/136/2016 – 11 July 2016