GEARING UP MOMENTUM KEYNOTE SPEECH FRANOIS VILLEROY DE GALHAU - - PowerPoint PPT Presentation

INVESTMENT IN FRANCE: GEARING UP MOMENTUM

KEYNOTE SPEECH FRANÇOIS VILLEROY DE GALHAU GOVERNOR, BANQUE DE FRANCE

3 MAI 2018

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CORPORATE INVESTMENT IN FRANCE: A COMPARISON WITH THE EURO AREA

18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 France Germany Italy

NFC investment rate (% of VA)

8 9 10 10 11 11 12 12 13 13 14 14 8 9 10 10 11 11 12 12 13 13 14 14 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 France Germany Italy

Productive* investment (% of VA)

Source : Eurostat * Investment in machinery, R&D and intellectual property rights Source : Eurostat

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CONTRIBUTIONS TO THE GROWTH OF CORPORATE INVESTMENT IN FRANCE

• Extra depreciation measure (“suramortissement”): estimated impact on investment

around 0.2 pp in 2015 and 1.2 pp in 2016 (included in residuals).

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1 2 3 4 5

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1 2 3 4 5 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 Investment Private value added Profit Margins Cost of capital Residuals

Contributions to the annual change in corporate investment (in %)

Source: BdF model MASCOTTE on INSEE data

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COST OF CAPITAL OF NON-FINANCIALS COMPANIES (NFCS)

64 76 93 125 62 72 70 46

20 40 60 80 100 120 140 160 180

Euro area France UK USA

External financial liabilities of NFCs (% of GDP)

Equity Debt Source: Banque de France (2017Q4)

5 10 15

2006M1 2008M1 2010M1 2012M1 2014M1 2016M1 2018M1

NFCs' Cost of Capital : France

CoE with buybacks WACC Loan rate Bond rate

A LOWER CONTRIBUTION OF CAPITAL TO POTENTIAL GROWTH

Potential growth and its components (% and pp)

Source: Banque de France, March 2018

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A FINANCING UNION FOR INVESTMENT AND INNOVATION

The microeconomic accelerator:

A Financing Union for Investment and Innovation

Incentives for cross-border investments (equity): accounting, taxes, insolvency laws Long-term pan-European savings products; European venture capital Completion of Banking Union; Consolidation

• f European

banks Control of vital financial activities and risks Innovation and digitalisation Scaling-up

• f SMEs

Green finance and energy transition Savings exceed investment by about €400bn, but fragmentation Capital Markets Union