The euro area has finally moved out of recession, and at this stage pent-up demand could become a major contributor to a recovery. However, there is rather limited pent-up demand in private consumption. Hence, we do not expect a significantly higher growth rate due to unleashed consumption, but the contribution to growth should be modest.
On the other hand, the amount of pent-up demand in business investment is considerable. Enterprises have saved and held back investments for almost five years and the return of confidence should imply that postponed investments are initiated.
We predict investments to have a positive contribution tooward growth of 0.3pp annually during 2014. However, the previous years' postponed investments give an upside risk to our forecast, and could imply a boost to growth in 2014.
Among the four biggest countries in the euro area, the amount of pent-up demand in investments is most pronounced where the crisis hit hardest, but postponed investments in the core countries is expected to be initiated faster.
To Read the Entire Report Please Click on the pdf File Below.
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Pent-Up Demand In Investments Could Boost Euro Area Growth
Published 09/03/2013, 06:42 AM
Updated 05/14/2017, 06:45 AM
Pent-Up Demand In Investments Could Boost Euro Area Growth
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