Perspectives for CESEE Countries
Edited by Ewald Nowotny, Doris Ritzberger-Grünwald and Helene Schuberth
Chapter 6: Post-crisis recovery in slow-motion mode: the role of the non-financial corporate sector
The aftermath of the global financial crisis that started in 2008 is characterized by a very sluggish economic recovery, particularly due to the weakness of corporate investment. Against this backdrop, we examine the role of private sector balance sheet repair – particularly in the non-financial corporate sector – as a drag on investment. Sectoral deleveraging needs may seriously impair investment expenditures, and thus might have long-term effects on potential growth rates. In 2013, the average level of real gross fixed investment in the European Union (EU) and the euro area was still 17 per cent and 18 per cent, respectively, below the peak reached in 2008 (European Commission, 2014). The decline in investment has been particularly large in stressed economies of the euro area, where investment has fallen by up to more than 50 per cent, while the fall has been less severe in Central, Eastern and South-Eastern Europe (CESEE). A consensus view seems to be emerging that this extraordinary decrease in investment activity is caused by the combined effect of credit constraints and demand-driven factors, and that the associated negative feedback loops push some of the countries into a balance sheet recession. In this context, demand-driven factors, such as the balance sheet position of firms (and households) per se may exercise an impact on investment decisions, irrespective of the existence of credit constraints.
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.