Investment firm BBVA Research has declared that there is no widespread weakness in investment across the world, despite an uncertain macroeconomic backdrop.
These were among the declarations in the company’s new report, How is Investment Doing? A Cross-Country Analysis. BBVA Research also wrote that there was great divergence across Europe in business investment, citing Spain and Germany as underperforming in 2023 with France clearly ahead of both nations.
Also included within the analysis were the potential impacts on investment from the trends of protectionism and interventionism, the climate transition, digitalisation and ageing.
According to the authors, two — protectionism and interventionism, and AI and digitalisation — are likely to create new investment opportunities or drive investment up, while the others — the climate transition and demographics — are likely to have a negative impact.
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They wrote: “Protectionism and interventionism will create new investment opportunities, at least in main developed countries and their main allies, but could reduce FDI flows, efficiency gains and incentives to innovate. AI and digitalisation are likely to drive investment up; the magnitude of related fixed capital spending ahead will depend on productivity gains, capital cost, public policies… AI expansion will also increase the demand for renewable energy [which is an opportunity for countries not in the AI frontier].”
They added: “Climate transition has mixed effects on investment; its overall impact will likely be positive, as investment spending will likely increase to satisfy clean energy needs and guarantee production resilience in a context of more frequent climate shocks; policy uncertainty is still high. Ageing is expected to drive investment down as it reduces population growth [labour supply] and increases the share of elderly people, which seem to have lower investment needs in comparison to younger cohorts.”
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Meanwhile, the ongoing issue of unfavourable demographics is likely to weigh heavily on demographics, says BBVA Research. The firm also says that the ageing impact is not obvious.
It added: “[These] could be offset by factors such as higher public investment on elders [who represent an increasing share of the voters] or the incentives that ageing creates to increase automation.”
