Ignazio Visco: Public investment for developing the economy

Address by Mr Ignazio Visco, Governor of the Bank of Italy, at the 64th Conference on Government Studies "Economic development, financial constraints and service quality - investments and guarantees", Varenna, 22 September 2018.

The views expressed in this speech are those of the speaker and not the view of the BIS.

In the last decade Italy's economy experienced the most acute crisis in its history. The double-dip recession, during which GDP contracted by roughly nine percentage points, was followed by an anaemic and bumpy recovery: from 2013 to today, less than half of this lost ground has been recouped. Against this backdrop, there have been calls from many quarters for higher public spending, which can have positive effects on economic activity in the short term and on growth potential in the longer term.

The boost from increased spending is usually greater when this is financed by a deficit. It can be even stronger if the investments made are matched by private capital, increasing its returns at the margin and thereby stimulating firms' investment expenditure. In the medium to long term greater growth potential comes from creating new opportunities for economic activity and stimulating innovation; both can be achieved through the completion of material infrastructure, especially if tech-intensive, and above all through investment in research and knowledge.