Investment and Investment Finance in Slovenia Debora Revoltella Chief Economist European Investment Bank Bank of Slovenia, European Investment Bank, European Commission Conference Ljubljana November 16, 2017 24/11/2017 1
Investment decline has been strong, and persistent, particularly for corporates Investment dynamics by assets Investment dynamics by sector 110 110 100 100 90 90 80 80 70 70 60 60 50 50 f 2005200620072008200920102011201220132014201520162017 f 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Corporations Government Households Dwellings Other buildings/structures IPP Machinery & equipment The graph shows the evolution of total Gross Fixed Capital Formation. (in real terms); by institutional sector and asset type. The data has been indexed to equal 100 in 2008. For 2017 we use the forecast of the European Commission. Source: Eurostat, European Commission 24/11/2017 European Investment Bank Group 2
Infrastructure investment is slowly regaining traction, but the effect of the EU cycle is visible Infrastructure investment in Slovenia Infrastructure investment in Slovenia (occupational) (institutional) per cent of GDP per cent of GDP 4.5 4.5 4 4 3.5 3.5 3 3 2.5 2.5 2 2 1.5 1.5 1 1 0.5 0.5 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Health Education Communication Transport Utilities Corporate Government Note: Annual infrastructure investment as a share of GDP, broken down Note: Annual infrastructure investment as a share of GDP, broken down by occupational sector. by institutional sector. Source: EIB Econ calculations, Eurostat, national authorities Source: EIB Econ calculations, Eurostat, national authorities 24/11/2017 European Investment Bank Group 3
What can 12,000 firms tell us about investment trends in Europe? EIB investment survey: • 12,500 firms surveyed across EU28 (of which 400 in Slovenia) • NFCs 5+ employees in manufacturing, services, construction & infrastructure sector • Information on: • Firm characteristics and performance • Investment needs and constraints • Past investment activities and future focus • Investment finance • Representative of the economy (firms weighted by value-added) • Data collected from April-July 2017 24/11/2017 European Investment Bank Group 4
Business investment activity is picking up in Slovenia, particularly for the manufacturing sector Investment cycle Low investment expanding High investment expanding Firms expecting to increase/decrease investment in 28% Man HU HR current financial year (net balance,%) 23% Large LT AT CY DE 18% SK NL SI Infr PL PT BE EE LU 13% IT EU CZ FI LV DK SME SE 8% UK ES FR BG MT 3% GR -2% IE RO Serv Constr Low investment contracting High investment contracting -7% 56% 66% 76% 86% 96% 106% Share of firms investing Note: Plots the share of firms with investment expanding/contracting relative to the share of firms investing, by sector or Member State; cross centred on EU average. Source: Econ EIBIS 24/11/2017 European Investment Bank Group 5
Slovenian firms invest more in machinery and less in intangibles than the EU average Areas of investment Innovation activity per cent per cent 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% EU 2016 EU 2017 SI 2016 SI 2017 Manufacturing Construction Services Infrastructure SME Large 0% EU 2016 EU 2017 SI 2016 SI 2017 Manufacturing Construction Services Infrastructure SME Large Land, business buildings and infrastructure Machinery and equipment R&D Software, data, IT, website No Innovation New to the Company Training of employees Organisation/business processes New to the Country New to the World Note: Average of responses for allocations by area in per cent: Q. In the last financial year, Note: Average of responses in per cent: Q. What proportion of total investment was for how much did your business invest in each of the following with the intention of maintaining developing or introducing new products, processes, services? Q. Were the products, or increasing your company’s future earnings? processes or services new to the company, new to the country, new to the global market? Source: Econ EIBIS Source: Econ EIBIS 24/11/2017 European Investment Bank Group 6
The share of firms believing that they invested too little in the past is higher in Slovenia than in the EU Perceived investment gap per cent EU 2016 EU 2017 SI 2016 SI 2017 Manufacturing Construction Services Infrastructure SME Large 0% 20% 40% 60% 80% 100% Invested too much About the right amount Invested too little Don't Know/refused Note: Share of responses in per cent: Q. Looking back at your investment over the last 3 years, was it too much, too little, or about the right amount? Source: Econ EIBIS 24/11/2017 European Investment Bank Group 7
Capacity expansion is becoming the top investment priority Future investment priorities Capacity utilisation (EIBIS) per cent of total investment per cent 100% 80% 70% 80% 60% 50% 60% 40% 40% 30% 20% 20% 10% 0% 0% EU SI Manufacturing Construction Services Infrastructure SME Large EU 2016 EU 2017 SI 2016 SI 2017 Manufacturing Construction Services Infrastructure SME Large 2017 2016 Capacity expansion Replacement New products No investment planned Note: Share of firms by main purpose of investment, in per cent. Q. Looking ahead to the Note: Average share of responses in per cent: Q. In the last financial year, was your next 3 years, which is your investment priority (a) replacing existing buildings, machinery, company operating above or at maximum capacity attainable under normal circumstances? equipment, IT; (b) expanding capacity for existing products/services; (c) developing or introducing new products, processes, services? Source: Econ EIBIS Source: Econ EIBIS 24/11/2017 European Investment Bank Group 8
The quality of the capital stock scores relatively well in European comparison State-of-the-art machinery and equipment Share of high energy efficiency buildings average share in per cent average share in per cent 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% CY GR AT DE HU IT LU ES FI SI SE NL LV MT EE IE LT BE HR DK CZ PT RO UK FR SK PL BG GR CY AT DE ES HU HR SI PT IE MT IT DK LU RO NL BE BG EE UK CZ SK LV SE FI PL FR LT State-of-the-art machinery and equipment High energy efficiency standards Note: Average of responses in per cent: Q. What proportion, if any, of Note: Average of responses in per cent: Q. What proportion, if any, of your machinery and equipment, including ICT, would you say is state-of- your commercial building stock satisfies high or highest energy efficiency the-art? standards? Source: Econ EIBIS Source: Econ EIBIS 24/11/2017 European Investment Bank Group 9
Availability of skilled staff has become the key concern in most sectors Long-term barriers to investment Investment barriers by size/sector per cent per cent Demand for Demand for product or service 35 46 40 22 42 22 product or service Availability of Availability of skilled staff 71 76 59 46 64 59 skilled staff Energy costs 40 55 48 49 52 36 Energy costs Access to digital 17 12 21 23 23 15 infrastructure Access to digital infrastructure Labour market 57 56 67 57 64 54 Labour market regulations regulations Business regulations 63 61 61 60 62 61 Business regulations Adequate transport 34 46 32 38 37 33 infrastructure Adequate transport infrastructure Availability of finance 18 48 37 35 38 18 Availability of finance Uncertainty about the 65 74 67 59 67 62 future Uncertainty about the future Manufacturing Infrastructure Construction Services 0% 20% 40% 60% 80% 100% Large SME EU 2017 SI 2017 2016 Note: Share of responses in per cent: Q. Thinking about your investment Note: Share of responses in per cent: Q. Thinking about your investment activities, to what extent is each of the following an obstacle? Is a major activities, to what extent is each of the following an obstacle? Is a major obstacle, a minor obstacle or not an obstacle at all? obstacle, a minor obstacle or not an obstacle at all? Source: Econ EIBIS Source: Econ EIBIS 24/11/2017 European Investment Bank Group 10
Finance is mostly internal finance and bank loans Source of investment finance Type of external investment financing per cent per cent 100% 100% 80% 80% 60% 60% 40% 20% 40% 0% EU 2016 EU 2017 SI 2016 SI 2017 Manufacturing Construction Services Infrastructure SME Large 20% 0% EU 2016 EU 2017 SI 2016 SI 2017 Manufacturing Construction Services Infrastructure SME Large Bank loan Other bank finance Bonds Equity Leasing Factoring Non-institutional loans Grants Other External Internal Intra-group Note: Average of responses in per cent: Q. What proportion of your Note: Q. Approximately what proportion of your external finance does investment was financed by each of the following? each of the following represent? Source: Econ EIBIS Source: Econ EIBIS 24/11/2017 European Investment Bank Group 11
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