ECB: Still Uncertain When Firms Will Start Spending Accumulated Savings on Investment

3 August 2022

By David Barwick – FRANKFURT (Econostream) – It remains unknown when euro area companies will begin to devote the net savings accrued during the pandemic to investment, though there are opportunities in need of considerable funding, the European Central Bank said on Wednesday.

In a pre-release from the fifth economic bulletin of 2022, due out Thursday, the ECB noted that after declining precipitously during the pandemic, corporate investment had recovered significantly but very unevenly.

In particular, the pandemic had motivated digitalisation, while a series of factors were boosting green investment by firms. But the investment headwinds of the last two years ‘also pose clear risks in the years ahead’, the ECB said.

‘The war has intensified risks to the short-term outlook for investment in relation to supply constraints, production costs and uncertainty’, it said. ‘Corporate savings have increasingly exceeded investment. It is still uncertain when firms will start spending their accumulated savings on investment.’

Digitalisation and the greening of the Eurozone economy were key to the recovery of corporate investment, the ECB said. ‘This twin transformation has created investment opportunities during the pandemic, but investment needs in these areas remain considerable and expenditures are still insufficient’, it said.

The ECB said challenges were related to financing, regulation and incentivisation, and that these necessitated policy coordination.