The Governor's
Concluding Remarks
Annual Report
Rome, 31 May 2024
year
financial
130th
th
Year
130
2023
Financial
The Governor's
Concluding Remarks
Annual Report
2023 - 130th Financial Year
Rome, 31 May 2024
Ladies and Gentlemen,
The global economy has continued to expand in recent months, despite
the persistently restrictive tenor of monetary policy in many countries and
the uncertainty caused by ongoing tensions and conflicts in several regions of
the world.
The short-term outlook remains weak, however. Global GDP is expected
to grow by around 3 per cent in 2024, significantly below the average for the
first 20 years of this century. After stalling in 2023, trade is expected to return
to growth this year, albeit less so than in the past.
Cyclical risks, long tilted to the downside, are becoming more balanced.
The ongoing global disinflation suggests that monetary conditions will ease,
but will do so at a different pace in each of the major economies.
Growth is uneven both among the advanced economies, with the United
States proving to be particularly strong, and among emerging and low-income
economies.
Growth in the latter countries since 2019 has not been enough to narrow
welfare gaps vis-à-vis richer countries; high debt servicing costs place many of
them in a vulnerable position. The default of one or more of the low-income
economies would presumably produce only marginal systemic spillover effects
on a global scale,1 though the disorderly management of these crises would
have serious consequences for the countries involved and could give rise to
geopolitical disputes.
In the coming years, the global economy will be impacted by low
productivity growth in many areas, by the phasing-out of the fiscal stimuli
rolled out to counter the effects of the pandemic and - above all - by
the geopolitical tensions that show no signs of easing. According to the
International Monetary Fund, global growth is expected to continue at
around 3 per cent until the end of the decade.
World trade
Signs of fragmentation in international trade and financial flows are
intensifying. The contentious political and trade relationship between the
United States and China has worsened; several areas of the world are plagued
by tensions and armed conflicts.
It is too soon yet to speak of deglobalization, but it is clear that the
process of rapid integration of the world economy has come to a standstill.
World trade as a percentage of GDP has remained at 30 per cent over the last
15 years, after having doubled in the previous two decades.
Since 2010, foreign direct investment has also stagnated at global level.
In recent years, there has been a decline in flows between blocs of politically
distant countries and a marginalization of the poorest countries.
In the international monetary system, the role of the different currencies
and that of the payment and market infrastructures has taken on a strategic
importance that goes well beyond the purely economic sphere, particularly
after sanctions were imposed on Russia.
The dollar and the euro are still the main reserve currencies. The Chinese
renminbi is rapidly growing in importance, however, as its increasing use for
cross-border payments and commercial transactions shows. Some central banks
are also adjusting the composition of their reserves, reducing their holdings
of the major currencies in favour of gold, partly in response to sanctions. The
future moves on this front by the major economies will need to be assessed in
light of the possible repercussions on the global monetary system.
International political tensions have heightened the focus on the risks
linked to reliance on long and complex global production chains, which had
already emerged during the pandemic.
The governments of many of the advanced countries have become
reluctant to depend economically on countries perceived as unreliable from
a geopolitical standpoint. They have taken steps to achieve autonomy in
strategic manufacturing sectors and to diversify the supply chains for critical
resources such as agricultural, energy and technological goods. These measures
have frequently taken the form of protectionist policies: the number of trade
restrictions introduced in 2023 was three times higher than in 2019 (Figure 1).
Firms are reviewing their strategies, with a view to reorganizing on a national
or regional basis the activities that were carried out on a global scale in the past,
and to diversifying their sources of supply. Surveys conducted by Banca d'Italia
with other central banks show that many European manufacturing firms are
replacing their Chinese suppliers with EU-based ones.
Figure 1
New trade restrictions imposed at global level (1)
(number of restrictions)
3,000 3,000
2,000 2,000
1,000 1,000
0 0
'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
Investment Goods Services
Source: Global Trade Alert.
(1) Unilateral changes in the relative treatment of foreign versus domestic commercial interests, with
reference to both trade flows and foreign direct investment.
We can no longer disregard the need to redress the balance between
efficiency and security.
At the same time, the negative consequences of severe economic
fragmentation and of a return to protectionism should not be underestimated.
They are not limited to the countries concerned nor to the purely economic
sphere. History teaches us that trade openness and the free movement of
goods, capital, ideas and people are powerful drivers of integration and
prosperity.
In a more challenging environment than in the past, we must therefore
protect those principles of international cooperation and the multilateral
institutions that have underpinned global economic development and have
fostered a lasting peace among the major powers since the end of World
War II.
Economic fragmentation and technological challenges in Europe today
Given how open it is to the rest of the world, the euro area is significantly
exposed to the potential risk of global economic fragmentation.
Trade with countries outside the euro area was in excess of 55 per cent of
GDP in 2023, compared with foreign trade equal to 40 per cent of GDP for
China and 25 per cent for the United States.2 Exports contribute to overall
demand to a far greater extent than in the United States.
The euro area is also dependent on foreign supplies of key resources: oil
and natural gas, for instance, which account for over half of its total energy
needs, originate almost entirely from third countries.
These vulnerabilities bear on the ongoing decline in Europe's international
standing. The population of Europe is now only 5.7 per cent of the global
population. Over the last two decades, the European Union's share of global
GDP has fallen from 26 to 18 per cent, whereas that of the United States has
remained almost unchanged, at 26 per cent, and that of China has quadrupled
to 17 per cent (Figure 2). This decline mainly reflects the unsatisfactory growth
in productivity, which has fallen behind the United States by 20 percentage
points over the same period.
Figure 2
Global GDP shares of the world's main economies
(per cent)
30 30
United States
European Union (1)
20 20
China
10 10
India
0 0
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Source: International Monetary Fund.
(1) The data refer to current EU Member States.
In the current geopolitical environment, Europe must act decisively
to become more competitive and bolster its strategic autonomy. This
is not in order to set itself against other countries or to retreat within
its borders, but to safeguard the future of European citizens, to gain in
global authority and to preserve the progress made so far towards a more
integrated world.
The scale of the challenges ahead of us requires forthright action on
different fronts.
First of all, the growth model of the past two decades needs redressing
by limiting undue reliance on foreign demand. The single market must be
optimized and expanded by strengthening integration in such strategic sectors
as telecommunications, energy and finance.
Europe needs to remove the barriers that stand in the way of it achieving
the full potential - in terms of economies of scale and number of consumers -
of an internal market that compares with that of the United States, also with
a view to increasing competition and innovation. Further, because greater
competition and innovation entail greater risks, risk-sharing mechanisms also
need to be strengthened. I will come back to this matter shortly.
The European Union also has to reduce its energy dependency by
increasing the generation of renewable energy using its ample store of natural
resources.
This will contain energy costs and make us more competitive, but it will
not free us from our reliance on foreign suppliers of the metals and minerals that
are needed for the energy transition. We must therefore establish dependable
and mutually beneficial economic and diplomatic ties with the countries that
are richest in critical inputs, on the strength of our capacity to provide them
with the technologies they need to integrate into global production chains.3
A third area of intervention is the production of advanced technologies, in
which Europe currently lacks sufficient specialization. At a time of technological
protectionism, it is essential that investments in technology keep pace with those
of other advanced countries, focusing on cutting-edge sectors such as robotics,
digital and communication infrastructure, space exploration, biotechnology
and artificial intelligence. This requires a regulatory environment that favours
innovative business initiatives, being mindful that there are some sectors in
which competition operates globally, not at European or national level.
Artificial intelligence will lead to potentially disruptive changes in the
global economy. It will support productivity and growth, albeit with an
uneven distribution of costs and benefits across sectors and across society,
especially in the short term; it will also involve huge energy consumption.
European firms should aim to become involved in developing AI technology.
Joint initiatives between players from different countries would make it easier
to find the vast amount of financial resources required to compete with foreign
producers and create the conditions for building on the outstanding scientific
output of researchers working across the EU; they would also make it possible
to counter the market power of foreign tech giants.
A common response
These lines of intervention do not cover all the fields in which the EU
is called to act. There is a need for common policies when it comes to the
environment, defence, immigration, and education and training, for instance.
This will require substantial resources: the European Commission
estimates that over €800 billion in public and private investment will be
needed annually until 2030 to sustain the climate and digital transitions and
to raise military spending to 2 per cent of GDP.4
For individual nations to embark on such a vast plan would entail a
duplication of spending and sacrificing the achievement of economies of
scale. The fiscal capacity of many countries would be a limit and would risk
compromising the endeavour, which has to be broad in scope, and would also
risk increasing the fragmentation of the single market.
Since many of these projects address common public goods such as the
environment and external security, insufficient expenditure would be to the
detriment of all EU countries and citizens.
It is therefore necessary, in everyone's interest, to act on these initiatives
at European level.
Completing the European economic architecture
The European economic architecture lacks two essential ingredients: a
common fiscal policy and an integrated capital market. The banking union
remains incomplete.
With a fully complete economic architecture, Europe could have been
better able to weather the crises of the last fifteen years. There is a pressing
need to address these issues in light of the current unstable geopolitical
environment and of the huge investments that Europe has to make.
The new fiscal framework
In a monetary union, a central budget has two main functions: to finance
shared public goods and to respond to cyclical fluctuations, both by smoothing
out their impact over time - which can also be done at national level, to some
extent - and by offsetting the effects of asymmetric shocks across countries.
A European budget would allow us to take a fiscal stance that fits the area
as a whole, rather than being the mere sum of national policies. It would help
us cope better with strong and long-lasting shocks, such as the pandemic or
the energy crisis, making fiscal policy consistent with monetary policy.
The recent reform of European economic governance has not resulted
in significant progress in these directions, nor has it streamlined the rules as
necessary. Without any progress towards a common fiscal policy, any reform
only tackling national policies risks making European rules appear to privilege
austerity over development.
However, the new rules introduce innovations that are consistent with
growth. They focus on the medium-term sustainability of public debt, rather
than on the fine-tuning of fiscal policy, which should pave the way for
longer-term planning and realistic paths for fiscal consolidation. They also
acknowledge the relationship between the two levers of fiscal sustainability,
i.e. fiscal policy and the reforms and investment needed for development.
The effects of the new framework will depend on how it is applied: it
can reinvigorate the European economy if it combines the required fiscal
discipline with the ultimate goal of promoting growth.
If the new rules prove effective, cooperation between EU Member States
will grow stronger over time, as will public trust in European institutions
and, ultimately, in the future of the EU. This would make it possible to move
towards a full-fledged fiscal union, which can rely on adequate funding of its
own and on debt issuance.
Building a European capital market
We must not deceive ourselves into believing that the huge investments
needed for the competitiveness of the European economy can be funded
without a major contribution from private investments and without drawing
on the expertise of the financial industry. It is therefore essential to build a
European capital market.
The euro area has been running a current account surplus for years. As
a result, it generates savings that exceed investment and are partly redirected
abroad. In order to retain domestic savings and attract international funds, we
need an integrated, efficient, liquid, technologically advanced European capital
market that can allocate these resources to the most capable entrepreneurs.
A single capital market would increase cross-border investment flows
and provide households, firms and financial intermediaries with better
opportunities for risk diversification, thus mitigating the impact of cyclical
fluctuations. Only a quarter of local shocks are estimated to be currently
absorbed through the banking and financial channels in the euro area,
compared with three quarters in the United States.
These are the goals of the European Commission's Capital Markets Union
project, which has been put forward several times over the past decade.
Yet European capital markets remain underdeveloped and fragmented,
despite efforts to integrate them through EU legislation. In the euro area, the
value of corporate bonds as a share of GDP is three times lower than in the
United States. Furthermore, although equity is the main source of funding
in both jurisdictions, in Europe it is largely unlisted, while in the US most
equity is traded on the stock exchange, thereby offering US firms access to a
greater pool of potential investors.
Today, there are 59 regulated stock markets in Europe, owned by over
30 groups,5 with stock-market infrastructure including 27 central securities
depositories (CSDs) and 10 central counterparties (CCPs). In the US there
are 24 stock markets, mostly owned by four groups, one CSD and one CCP.
The European market's fragmentation, I believe, has clear disadvantages in
terms of operations and liquidity, and creates barriers to entry for investors as
well as for businesses.
If we want to make progress towards a single European capital market,
we need to address two key issues.
The first is the lack of a European sovereign safe asset.
A common safe asset would allow for better pricing of financial products,
such as corporate bonds and derivatives, encouraging their expansion.
It would provide a form of collateral that could be used across all market
segments, including for cross-border transactions, and it would serve as the
basis for foreign central banks' reserves in euro, strengthening the global role
of our currency.6
The securities issued under the NextGenerationEU programme go in
this direction. However, one-off placements do not mark a turning point: the
scarce liquidity of these bonds discourages their inclusion in benchmarks and
is an obstacle to the use of derivative contracts for risk management purposes.
The second obstacle to the creation of a European capital market is the
fact that the banking union is incomplete.
Establishing the Single Supervisory Mechanism and the Single Resolution
Mechanism was a major step forward, but it was not enough to create a fully
integrated European banking market. The credit sector remains fragmented
along national lines: there is no European deposit guarantee fund, the bank
crisis management system is incomplete and obstacles to the transfer of
banking groups' capital and liquidity across countries still exist. As banks play
a key role in all capital market segments, it is hard to think of an integrated
market if they cannot operate effectively across the euro area.
The introduction of a European safe asset and the completion of the
banking union are preconditions for creating a single capital market, but
they are not the only relevant issues. We must not forget the importance of
drafting a single European Finance Act, of strengthening central supervision,
and of harmonizing corporate crisis management mechanisms.
Despite the issues that I have described, I would like to stress the progress
that Banca d'Italia and the Eurosystem are making in providing
cuttingedge infrastructures for payment, securities and collateral transactions to
the European market. Our goal is to ensure its security and efficiency using
TARGET services and - looking ahead - through a digital euro and joint
collateral management throughout the monetary union.
The economic situation and monetary policy in the euro area
The real economy
The euro-area economy has been stagnating since the end of 2022.
Aggregate demand has been affected by tight monetary conditions, the impact
of inflation on real household income, and the slowdown in global trade.
Manufacturing activity is now down to end-2020 levels. The difficulties
in the manufacturing sector were particularly pronounced in Germany, which
was hit hardest by the energy price increases and the uncertain performance
of the Chinese economy.
However, there have been positive signs recently. Euro-area GDP rose
by 0.3 per cent in the first quarter of 2024, reflecting better than expected
performances in the main economies. Some leading indicators for services
and international trade also showed encouraging signs.
Against a backdrop of disinflation, the rebound in consumers' purchasing
power as a result of wage growth and the resilience of employment suggests
that domestic demand may gain momentum in the months ahead.
The projections published by the European Central Bank in March point
to recovery firming up this year and GDP growth strengthening to 1.5 per
cent over the next two years.
These growth prospects are modest and subject to downside risks.
Geopolitical tensions could curb the recovery in global trade and lead to
higher commodity prices. The restrictive monetary policies implemented
in several countries may dampen consumption and investment more than
expected. Fiscal policies could become stricter due to a greater than expected
consolidation of public finances.
Inflation
Inflation in the euro area stood at 2.4 per cent in April, down by 8
percentage points from its October-2022 peak. The reduction was exceptional
in size and speed, just as the earlier increase had been.
The ongoing disinflation is confirmed by the slowdown in the core
component of the consumer price index, which excludes the typically more
volatile energy and food items. Inflation started falling again last month in
the service sector too, mitigating fears that this component might dampen
disinflation.
Price growth is set to decline further in the coming quarters, albeit with
some fluctuations. Wage growth is expected to slow, as purchasing power
gradually recovers. At the same time, high profitability allows firms to absorb
the recent wage increases without raising their selling prices.
Moreover, the decline already recorded in energy prices and the expected
fall in interest rates will make it less costly for firms to increase their capital
per worker. This should result in higher productivity and slower growth in
unit labour costs, thereby reducing the inflationary pressures that might stem
from wage increases.
The ECB's projections and analysts' expectations point to a return of
inflation to the 2 per cent target in 2025.
Monetary policy
Monetary policy has operated in a challenging economic environment
over the past four years. The pandemic crisis called for highly expansionary
measures, some of which were unprecedented. These had to be followed by a
rapid normalization and then monetary tightening after the inflationary flare-up.
Overall, this process was necessary. The pandemic crisis has been overcome,
with the help of fiscal policies, and a financial crisis has been avoided. Supply shocks,
production bottlenecks and soaring energy prices have not triggered an inflationary
spiral, as they had in the past. Medium- and long-term inflation expectations have
remained in check, leading to relatively fast and painless disinflation.
But now, we need to prevent monetary policy from becoming excessively
tight, pushing inflation below the ECB's symmetric target. Since last
September, when we last increased the interest rates, real short-term rates
have risen by almost half a percentage point.
Over the coming months, if the incoming data is consistent with the
current projections, it will be appropriate to ease monetary conditions.
This will not stop the action to restore price stability. Even with several
cuts in the key interest rates, the monetary policy stance will remain tight:
expected real rates implied by the financial markets, which incorporate a
cut in the reference rates of 60 basis points in 2024, will remain above any
plausible estimate of the natural interest rate for many months (Figure 3).7
Figure 3
Real interest rate and natural interest rate in the euro area (1)
(per cent)
2.0 2.0
1.5 1.5
Market expectations
1.0 1.0
Real interest rate
0.5 0.5
0.0 0.0
Natural interest rate
-0.5 -0.5
July '23 Oct. '23 Jan. '24 Apr. '24 July '24 Oct. '24 Jan. '25 Apr. '25 July '25 Oct. '25
Sources: Based on ECB, Bloomberg and LSEG data.
(1) The figure shows the actual (solid blue line) and the expected (dashed blue line) one-year real
interest rate as measured on 30 May 2024. It also shows estimates of the real natural interest rate: its
median (red line) and the 10th-90th percentiles (grey band). For further details, see Chapter 3, Annual
Report for 2023, 2024 (only in Italian).
The decisions of the US Federal Reserve will be a factor to be taken into
account, not a constraint, during monetary easing. A tighter than expected
US monetary policy stance could lead to a depreciation of the euro against the
dollar and create inflationary pressures. Empirical studies suggest, however,
that this effect would be overcome by the negative impact that the US
monetary tightening would have on global demand and financial conditions,
and therefore on euro-area inflation.
When defining the path of policy rate cuts, it should be borne in mind
that prompt and gradual action contains macroeconomic volatility better
than a tardy and hasty approach.
Unlike in the past, the decline in the near future in policy rates will be
accompanied by a reduction in the monetary policy portfolios of securities,
which will lead to a sharp contraction in outstanding liquidity and a
consequent tightening impulse in the credit market.
A gradual normalization of the Eurosystem's balance sheet after the
expansion of recent years is certainly appropriate. However, it is essential that
this process does not interfere with the monetary policy stance and that the
adjustment is carried out without creating liquidity shortages in the system or
fragmentation in the transmission of monetary impulses.
The review of the monetary policy operational framework was concluded
last March. The Governing Council decided that it will continue to implement
its monetary policy action through the rate on the deposit facility.
Under the new framework, it is essential that liquidity remains abundant
to ensure a firm control of short-term market rates. The liquidity needs will
be partly met through a structural portfolio of securities and through
longerterm refinancing operations. I believe that these components should be given
a significant weight in order to ensure a large and stable supply of reserves.
The Italian economy
The Italian economy has had the lowest per capita GDP growth rate
in the euro area for the past 25 years. Labour productivity is at a standstill;
investment only returned to above the levels recorded before the global
financial crisis in 2023, while total hours worked have not caught up yet.
Wage growth reflected the stagnation in productivity: employees' hourly
wages are one fourth lower than in France and Germany (Figure 4). In per
capita terms, real household disposable income has been flat since 2000, while
it has increased by more than one fifth in France and Germany since then.
Figure 4
Hourly wages: spread between Italy
and the main European countries (1)
(percentage points)
10 10
0 0
-10 -10
-20 -20
-30 -30
Euro area France Germany Spain
2000 2023
Source: Based on Eurostat data.
(1) A negative spread indicates that hourly wages in the euro area or in a country of comparison
are greater than in Italy. Hourly wages refer to payroll employment and are expressed in purchasing
power parity.
The Governor's Concluding Remarks BANCA D'ITALIA
14
Annual Report 2023
A recent recovery, to be consolidated
We are not doomed to stagnation, however: the recovery after the
pandemic crisis has exceeded expectations and been stronger than in the
other large euro-area economies. Unlike in previous crises, recovery has also
been robust in the Italian Mezzogiorno.
Between 2019 and 2023, a time of great turmoil, Italy's GDP grew by
3.5 per cent, against 1.5 per cent in France and 0.7 per cent in Germany,
and this gap is wider in per capita terms. Employment rose by 2.3 per
cent - almost 600,000 people - mainly in permanent contracts. The
unemployment rate, though still high, fell by 2.3 percentage points, to
7.7 per cent.
The recovery was fuelled by strong investment growth, also supported
by tax incentives. Investment grew far more than in the other main European
countries on average, not just in construction, which benefited from very
generous incentives, but also in machinery and intangibles, which better
reflect the technological progress and expectations about future demand
(Figure 5).
Figure 5
Changes in investment and exports in Italy
and in the main euro-area countries
(percentage change between 2019 and 2023)
(a) Investment in machinery (b) Exports of goods
and intangibles
-5 0 5 10 15 -5 0 5 10
Italy Italy
France Euro area
Euro area Spain
Spain Germany
Germany France
-5 0 5 10 15 -5 0 5 10
Source: Based on Eurostat data.
Exports of goods increased by 9 per cent, more than potential foreign
demand, thanks to the improvements in cost competitiveness and quality
achieved in recent years and to the diversification by sector and destination
market. They remained essentially stable in Germany and decreased in France.
Once the deterioration in the terms of trade caused by the energy shock
had been reabsorbed, the trade balance rapidly turned positive again. Italy is
now a net creditor to the rest of the world to the tune of €155 billion, or 7.4
per cent of GDP. Ten years ago, its net foreign position was negative by 23
per cent of GDP and was a source of vulnerability.
The Italian economy has certainly long benefited from expansionary
monetary and fiscal policies, but also from overhauling its production fabric.
The profitability and capital position of firms have improved over the
past decade.8 The weight of larger firms has also increased, as they can better
reap the benefits of technology and internationalization.9
There has been a significant, though still insufficient rise in productivity
in industry and in non-financial private services. If we exclude transport
equipment, Italy's manufacturing industry is the most automated of the main
euro-area economies: in 2021, the share of robots per 1,000 workers was 13.4
in Italy, against 12.6 in Germany and 9.2 in France.10 Since 2019, industrial
firms have doubled their share of investment in digital technologies, to 17
per cent.
Their return to capital accumulation and their ability to succeed in
international markets are encouraging signs of strength that need to be
consolidated.
Looking ahead, the Italian economy will be able to achieve a sustained
pace of growth if, on the one hand, it can deal with the consequences of
population decline and ageing, and on the other hand speed up productivity
significantly.
Population decline and labour market responses
According to Istat, the number of working age people will fall by 5.4
million between now and 2040, despite a net foreign inflow of 170,000
individuals per year. This decline is expected to cause GDP to fall by around
13 per cent, and by 9 per cent in per capita terms.11
Despite growing over the last decade, labour market participation is still
8 percentage points below the euro-area average, standing at 66.7 per cent.
The gap is not large for men, but it widens to 13 points for both young
people aged 20 to 34 and for women.
Youth employment has been affected by low growth.12 Many have looked
for better job prospects abroad: 525,000 young Italians emigrated between
2008 and 2022, and only one third of them came back to Italy. It is graduates
above all who have left Italy, attracted by far better pay, employment and
career opportunities.13 This out-migration depletes Italy's human capital,
which has traditionally suffered from low levels of education attainment.
The female employment rate is still 52.5 per cent. Balancing work and
family life in Italy is a challenge. Women leaving the labour force after their
first child is born is one of the main reasons for their low labour market
participation, and it is good that the National Recovery and Resilience Plan
(NRRP) has allocated considerable resources to childcare services.14
Measures to promote a different distribution between in-person
and remote working time could help to increase employment, as could a
revision of the deductions and cash transfers scheme in order to reduce work
disincentives for second earners,15 and policies to encourage the hiring of the
long-term inactive.
Marked increases in employment rates - up to average euro-area
levels - could offset the effects of population decline and keep headcount
employment.16 Support for employment may also come from a higher flow of
legal immigrants than that expected by Istat. Managing this flow will require
coordination with the other European countries, balancing the needs of the
production system with social equilibria, and enhancing measures to integrate
foreign citizens into the education system and the labour market.
However, it is clear that even with increased employment and migration
flows, the contribution of labour to economic growth will inevitably be
modest. Only productivity can ensure development, job opportunities and
higher incomes.
Reviving productivity: more investment, more innovation
Investment is the main way to spread technological innovation, which
accounts for most of the productivity gains.
For firms to invest, policies need first of all to ensure a suitable regulatory
and competition framework and a stable macroecono