In the years of the crisis, investment activity contracted sharply in all advanced economies. The decline was smaller in emerging economies, where growth in the early 2000s had been exceptionally strong. The signs of recovery, albeit diversified, are still modest, and the break with the pre-crisis trend now appears clear. The CSC has repeatedly focused on the main forces holding back investments: high uncertainty and expectations of low growth in demand, greater difficulties in obtaining financing, high unused production capacity, tight public budgets and, in Italy, profitability at historic lows .
Some of these constraints are common to all major economies, others are present mainly in those that have experienced high sovereign debt strain and consequently restrictive fiscal policies. Looking ahead, in the European context in particular, the same conditions that have contributed to depressing investment decisions are destined at least in part to persist: the availability of bank credit will not return to pre-crisis conditions (apart from the extremely expansive, which in turn reveal systemic fragility); the same can be said, after the bursting of the bubble, for the driving force represented by construction; and the persistent need to reduce public deficits will continue to give restrictive impulses to demand and limit resources for public capital expenditure.
Since, on the other hand, investments are not only a component of aggregate demand, but also constitute the main source of productivity growth (also due to their strategic nature of infrastructural enhancement), the delay accumulated in the adjustment of the endowment of capital goods is unlikely to it will be without consequences on the pace of future growth (and, therefore, on future investment itself). In recent times, the analyzes of the major international organizations on the reasons and consequences of the low accumulation of capital have multiplied, with worried and converging conclusions and exhortations to governments to promote investments more: directly, with more spending on infrastructures, and indirectly, with incentives and concessions.
A GENERAL CONCERN
The main international research organizations have dedicated specific studies to the issue of low investment, each time drawing attention to the role played by different variables. The IMF identifies the main determinant of the fall in fixed investments in the weakness of economic activity (accelerator effect), in turn attributed to persistently negative demand expectations. Added to this effect are those due to the tighter constraints of corporate finance and the strong uncertainty of the policy framework following the sovereign debt crisis.
Weakness in demand is the main cause of the fall in private investment also according to the OECD, which underlines how many economies have remained stuck in an equilibrium of low growth, low investment, high unemployment, stagnant wages and stagnant consumption, and how the current investment is lower than potential in relation to GDP. According to EIB assessments, a very high share of the fall in investments in Europe (53%) is explained by uncertainty regarding economic policies, to which must be added fears of a further credit crunch resulting from the high volume of non-performing loans still held by the financial system.
IT'S ITALY?
For Italy, where the recovery of the economy has started, but - consistently with the evolution of the economic situation - is still rather timid, an interpretation in line with that proposed by the IMF is suggested by the Bank of Italy, according to which the prolonged nature of the decline in investments mainly reflects the current and expected fall in demand, to which are added tensions on loans and, again, uncertainty. Furthermore, the IMF estimates indicate in the same period a trend in Italian investments lower than that attributable to the fall in demand and partly explained by factors of uncertainty and financial constraints.
According to Nomisma, the emergence of a real liquidity trap within the Eurozone would see Italy particularly penalized by expectations of low inflation (just above zero in the next 5 years), lower than the average for the area (around to 1%), which could only be compensated by a level of highly negative nominal interest rates "at full employment". Therefore, monetary leverage is ineffective, while we are witnessing a constant thinning of corporate cash flows and persistent credit rationing effects. In these conditions, the recovery of investments depends even more closely on that of demand.
Without a sustained recovery in demand, fears of a new recessionary relapse continue to induce the postponement of investment decisions, triggering a vicious circle that traps the economy in low growth. In this context, the lever represented, in an anti-cyclical key, by public investments assumes a potentially more important role than in the past. A study carried out within the framework of the European Commission underlines, in reality, that in the Eurozone it is precisely the contraction of public investments (the result of the adjustment of the public finances pursued by contracting capital expenditure in the face of the difficulties of compressing current expenditure) adversely affected the accumulation process.
The effect appears more serious in the peripheral economies (Spain, Italy) most penalized by the need to reduce budget deficits. In Italy, the cut in public investment during the second recession in 2011-14 (compared to the counter-cyclical support exercised at the start of the first in 2007-09) contributed to the spiraling of total investment up to 2014. A boost to investments in the coming quarters could come in Italy from the greater political stability, signaled by the gradual reduction of the degree of uncertainty, down from the peak reached in 2012 and lower than the average of the other major European economies.
A non-negligible stimulus, as has already occurred in the past with similar interventions, is proving to be provided by incentives for investment in capital goods for small-medium sized businesses. By disaggregating investment spending according to destination, it can be observed that – against a persistent decline in construction spending – investment in machinery and equipment reversed direction and began to recover in the second half of 2014. Their recovery is destined to continue and strengthen, as indicated by the profile of internal orders for capital goods.
