Why is investment so weak?

Authors Kramp, Paul Lassenius; Pedersen, Jesper
Subject Other economic analyses; Euro area
Type Monetary Review  
Year 2015
Published 7 July 2015
Link to publication Monetary Review, 2nd Quarter 2015
The low level of investment in both Denmark and the euro area is currently reflecting weak demand in particular. This reflects e.g. that some market participants expect lower future growth and that this is also subject to increased uncertainty. In general, neither firms nor banks had sufficiently large buffers prior to the financial crisis, and the banks' lending growth was too high. This contributed to the sharp decline in investment levels at the beginning of the crisis and the subsequent weak recovery. The significance of these factors is generally declining, however, but in some countries they may continue to hamper investment in the coming years. In order to support investment activity, it is important to implement further structural reforms that may strengthen the growth potential, remove regulatory barriers within and across the countries and improve the framework for access to funding.