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

CORPORATE INVESTMENT IN FRANCE: A COMPARISON WITH THE EURO AREA Productive* investment (% of VA) NFC investment rate (% of VA) 14 14 14 14 France 26 26 26 26 France Germany Germany 13 13 13 13 25 25 25 25 Italy Italy 24 24 24 24 12 12 12 12 23 23 23 23 11 11 11 11 22 22 22 22 21 21 21 21 10 10 10 10 20 20 20 20 9 9 19 19 19 19 18 18 18 18 8 8 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 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 Source : Eurostat Source : Eurostat * Investment in machinery, R&D and intellectual property rights 2

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). Contributions to the annual change in corporate investment (in %) 5 5 4 4 3 3 2 2 1 1 0 0 -1 -1 -1 -1 -2 -2 -2 -2 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 Investment Private value added Profit Margins Cost of capital Residuals Source: BdF model MASCOTTE on INSEE data 3

COST OF CAPITAL OF NON-FINANCIALS COMPANIES (NFCS) External financial liabilities of NFCs' Cost of Capital : France NFCs (% of GDP) 180 15 160 46 140 70 10 120 72 100 62 80 5 125 60 93 40 76 64 0 2006M1 2008M1 2010M1 2012M1 2014M1 2016M1 2018M1 20 CoE with buybacks WACC 0 Loan rate Bond rate Euro area France UK USA Equity Debt Source: Banque de France (2017Q4) 4

A LOWER CONTRIBUTION OF CAPITAL TO POTENTIAL GROWTH Potential growth and its components (% and pp) Source: Banque de France, March 2018

A FINANCING UNION FOR INVESTMENT AND INNOVATION Capital Markets Union Incentives for Long-term cross-border pan-European investments Innovation savings (equity): and products; accounting, digitalisation European taxes, venture capital insolvency laws Savings exceed The microeconomic accelerator: investment Scaling-up by about A Financing Union of SMEs €400bn, for Investment and Innovation but fragmentation Completion of Control of vital Banking Union; financial Green finance Consolidation activities and and energy of European risks transition banks 6