7. Investment
Breaking down investment and capital by asset type helps to better understand the main drivers of GDP and productivity growth. For example, it allows assessing the state of infrastructure and the volume of investment in growth-enhancing technologies, such as information and communication technology. Moreover, different asset types contribute in different ways to GDP and productivity growth. As explained in Chapter 4 Productivity and Economic Growth, capital services are the appropriate measure of capital input in productivity analysis and their measurement depends on the composition of the capital stock.
Capital stock is broken down into homogeneous asset groups with similar price deflators and depreciation rates. The 2008 SNA update introduced capitalising expenditures in weapons systems and research and development (R&D), which were previously considered intermediate consumption. Nevertheless, important intangible assets such as brand equity, data, and organisational capital remain outside the national accounts’ asset boundary. However, work is underway on how to better capture the extent of various aspects of digitalisation in the next update of the SNA in 2025.
Key findings
In around half of OECD countries, gross fixed capital formation (GFCF) grew faster than GDP in 2022, leading to increasing investment rates (investment over GDP, in current prices). In about a third of the countries the investment ratio declined in 2022, with the biggest declines (over 3 percentage points) recorded in Estonia and Norway. G7 countries’ investment rates grew, except in the United States where the rate was broadly stable and in Canada where it declined (Figure 7.1).
Around three-quarters of OECD countries reached or even exceeded their pre-pandemic (2015-2019) investment rates. However, several countries have yet to catch up with these rates, most notably Ireland, Norway, Colombia and Poland whose rates are still over 10 percentage points below pre-pandemic levels.
The developments in disaggregated asset categories varied across countries in 2022. The most dynamic categories on average were dwellings and other buildings and structures and intellectual property products. In about a third of the countries with available data, the combined category of dwellings and other buildings and structures was the most dynamic asset category (in terms of investment to GDP), with the biggest increases registered in Hungary, Israel, Italy, Finland and Germany. Investment rate of Intellectual property products (IPP) was slightly negative in about two thirds of countries with data. Estonia and Ireland saw relatively large decreases in their IPP investment rates, in excess of 1.5 percentage points. By contrast, the biggest increases were recorded in Denmark, Czechia, Sweden, Korea and France. The investment rate in other machinery and equipment and weapons systems slightly increased in majority of the countries, with biggest increases in Sweden, Ireland and France. Similarly, transport equipment investment rate slightly increased in majority of the countries, with the biggest increases in Estonia and Slovenia.
How to read the indicators
Table 7.1 below presents the minimum asset breakdown recommended by the 2008 System of National Accounts (2008 SNA).
While ICT assets are internationally traded and should be subject to similar price changes across countries, it has been observed that statistical agencies use (sometimes very) different price indices to deflate nominal investment in ICT assets. In addition, they also assume different depreciation rates and service lives for these assets. For these reasons, the OECD estimates productive capital stocks and capital services using a set of harmonised ICT investment deflators as well as common depreciation rates and average service lives for all assets and countries (Schreyer, 2002[1]).
Depending on the purpose of the analysis, different assets can be grouped into different categories. For example, dwellings, other buildings and structures, machinery and equipment and weapons systems, and cultivated biological resources may be grouped into tangible assets, as opposed to intangible assets, also referred to as intellectual property products (IPPs). A different classification often used in economic analysis distinguishes information and communication technology (ICT) and non-ICT assets. ICT assets include computer hardware, telecommunication equipment, and computer software and databases, while non-ICT assets include dwellings, other buildings and structures, transport equipment, other machinery and equipment and weapons systems, cultivated biological resources, and intellectual property products except computer software and databases.
The asset breakdown presented in Table 7.1 differs from the one recommended by the 2008 SNA for a few countries. In Korea, ICT equipment is included in other machinery equipment and weapons systems. In Australia, ownership transfer costs are included in total GFCF but are not allocated across assets. Consequently, the sum of GFCF for individual assets is lower than total GFCF for this country. In Norway, total GFCF excludes investment in weapons systems. In Indonesia, other buildings and structures are included in dwellings. In Argentina, China, Colombia, India, Saudi Arabia and Türkiye, the classification of GFCF by type of asset is not available. Therefore, only total GFCF is presented. In Canada and the United States, total GFCF excludes GFCF in cultivated biological resources.
For further methodological information, consult the OECD Productivity Statistics – Methodological notes at https://www.oecd.org/sdd/productivity-stats/OECD-Productivity-Statistics-Methodological-note.pdf.
OECD National Accounts Statistics (database), https://doi.org/10.1787/na-data-en.
OECD Productivity Statistics (database), https://doi.org/10.1787/pdtvy-data-en.