Global | Private investment, driving welfare and economic transformation

Summary

Societies that successfully strive for an investment-friendly environment will succeed in transforming their economies after the pandemic and will address the digital and environmental challenges prior to COVID-19. An efficient combination of private and public investment will be crucial.

Key points

• Key points:
• As shown by a recent BBVA Research Economic Watch, the evidence on the importance of private investment as a driver of economic growth and social welfare using a sample of more than 100 countries from 1960 to the present day is conclusive.
• A five percentage point increase in private investment on GDP is linked to an increase of 1.5 points in the long-term growth rate of per capita income. The implications of these results are enormous, as 1.5 points of growth would allow per capita income to double in just under two generations.
• The analysis also shows that the private investment rate can explain two-thirds of the differences in long-term growth between countries, which is very relevant given the heterogeneous sample of countries used.

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