The EU is expected to see greater average investment relative to GDP over the next five years, according to research by fDi Intelligence.
The firm said it had concluded this after an analysis of IMF data on gross fixed capital formation (GCFC) – defined as the total value of investment to add or maintain fixed productive assets, such as buildings and equipment, within a certain period. The raised average investment, it said, would be due to improving financial conditions and policy packages aimed at boosting capital deployment.
“Average investment in the EU is forecast to marginally increase to 23.5% of GDP between 2023 and 2027 – up from 23.1% in the previous five years, according to fDi calculations of data in the IMF’s October 2023 World Economic Outlook,” it said. “This is counter to forecasts that average global investment relative to GDP will decline slightly from 26.8% to 26.4% over the same period.”
Pandemic ‘bounce-back’
The research note continued: “The increase of investment in the EU is reflective of efforts to bounce back from subdued investment during the pandemic. The EU’s recovery and resiliency facility fund, a package of €723bn in grants and loans, is expected to be a major driver of reforms and investments in EU member states by the end of 2026.”
According to fDi Intelligence, some EU member states – including Greece, Lithuania and Portugal – are expected to see average investment relative to GDP jump over the next five years. “By comparison, average investment in emerging and developing Europe is expected to decline from 24.1% to 21.3% of GDP,” it added, however.
It went on to note that emerging market and developing economies are expected to see the largest fall in average investment, driven in large part by China. There, fDi Intelligence said that average investment is forecast to decline from 43.3% to 38.2% over the next five years. The importance of these figures, wrote the firm, is that forecasts for total investment as a percentage of GDP remain an indicator of the attractiveness of destinations for future investment.
