La concurrence, frein et moteur de l'investissement
Authors:   Département des études de l'OFCE, Sigogne Philippe , Fayolle Jacky , Baudchon Hélène , Chagny Odile , Falah Amel , Passet Olivier , Rifflart Christine , Cornilleau Gérard , Milewski Françoise , Bouthevillain Carine , Chauvin Valérie , Heyer Eric , Mathieu Catherine , Péléraux Hervé , Timbeau Xavier 
Published: October 2008

Competition, as both a brake and an engine of investments OFCE For the past year, the main engine of the european upturn has been the improved exchange rate and liquidity background. European exports are regaining market shares, especially in the case of Germany. The investment plans of European firms are more upbeat, though many larger countries, Germany, France and Italy are lagging. Private consumption growth is still vulnerable to a possible comeback of a cautious stance. Domestic policy-mixes as well as a revival of European coordination bear some responsibility in strengthening the current recovery. Would this responsability be yet fulfilled, a 3 % growth rate could be achieved in 1998 for Europe as a whole. The US growth outlook is consistent with a higher dollar exchange rate, in favour of the European growth (1,9 DM in 1998). American companies ease the growth process through efficient investments raising profits and jobs. During the year 1997 the monetary policy kept supporting growth. A moderate tightening is foreseeable before the end of 1997. The slowdown of growth in 1998 (2,6 % after 3,8 % in 1998) would allow for a better fitting of private behaviours to a credible monetary policy. The Japanese economy has recorded a new drop during the spring of 1997, offsetting the anticipated purchases triggered by the 1st April VAT increase. The monetary easing is, in the short run, unable to balance the effects of the restrictive fiscal policy. The main support of the activity is the yen's depreciation, as it helped stabilize market shares for one year. The limited outcome of the South East Asian financial crisis would not hinder the positive contribution of foreign trade to the 1998 growth (2,5 % after 0,9 % in 1997). In France, economic growth is taking off slowly, mainly thanks to the contribution of the foreign trade. The destocking, a lack-luster private consumption and the setback of investment have dampened the domestic demand. However, the turning point is over. Growth would reach 2,1% in 1997 and 3,3% in 1998. Once again, foreign trade is the more dynamic component of GDP. Exports benefit at the same time from a strong external demand and from favorable exchange rates. The trade balance surplus would continue to increase leading to a current surplus exceeding 2 % of GDP this year and 3 % next year. The slowing down of GDP growth has hampered the addition of new capacities. Firms postponed their replacement of equipment. They are not financially constrained, but they use their funds for other purposes than capital expenditures. The permanently high real long interest rates have slowed down new indebtedness and reduced the profitability of installed capital. Therefore, they have prevented firms from making new expenditures. But in 1998, firms investment would pick up again. The producer prices in manufacturing industries would stop decreasing. This would allow a downturn of the real interest rates and an increase in investment expenditures, at a modest level regarding the past slowdown. After a mediocre 1996 year, the purchasing power of households would accelerate in 1997 and in 1998. The ratio of tax to income would be stabilised at 23 % in 1997 then would rise by 0.4 % in 1998. Primary income would accelerate, thanks to increased payrolls in 1998 and a revival of activity for self-employed. On the other hand, the social security benefits would remain low. Private consumption would pick up, in line with the disposable income and a revived consumer confidence. The households' debt ratio would remain quite low, so that they would not need to save more to reduce their debt. Prices would stop slowing down at the forecast horizon. The recovery of raw materials prices and of the dollar would bring the fall of producer prices to a halt in the industry. But consumer prices would still grow slowly because of low wage costs. The current improvement of employment would be confirmed by the recovery, especially in the manufacturing industry. Concerning unemployment, prospects have improved. The unemployment rate would slow down from now to year-end and would stabilise during the first half- year period of 1998. A fall of the number of unemployed would happen in 1998. But, this fall would be limited by the inflow of previously discouraged workers. Due to the changing government, the French fiscal policy has been shifted on two points. First, the pace of the deficit reduction has been slowed. The general government deficit would reach 3,1% of GDP in 1997. The law of finance project for 1998 is based on a cyclical increase of revenues and on a GDP growth to help stabilising the general government deficit close to 3% of GDP. Expenditures are stabilised in real terms. The tax cuts planned by Juppé government are canceled.