Public investment can enhance productivity and promote economic growth as well as foster societal well-being. Investments are generally made in transport infrastructure, military defence systems, buildings (such as schools and hospitals) and other tangible or intangible assets.
In 2017, on average, OECD governments invested 3.1% of their GDP, a 0.5 p.p. decrease from 2007. Estonia and Norway (both 5.3%) invested the largest share of GDP. In Estonia, strategic public investment is a national priority as evidenced by the central identification of key public assets to be developed, a focus on raising the quality of public infrastructure and the achievement of green objectives in investment decisions, among others. On the other end, Israel invested the least (1.4%). In order to close the infrastructure gap (a comparatively low stock of public infrastructure), in relation to other developed economies, Israel has released a long-term national infrastructure strategy to 2030 including projects mainly in the transportation sector, but also in energy, water desalination and waste treatments. Consequently and despite different modalities foreseen to carry out this programme, public investment is expected to increase.
Between 2007 and 2017, Norway was the country that increased its investments the most (+1.6 p.p.) driven by substantial public investment in transport which has intensified in recent years, if transport projects are properly chosen and delivered they can help Norway transition away from oil-related activities (OECD, 2018). Ireland (2.9 p.p.) Spain (2.7 p.p.) and Greece (2.3 p.p.), on the contrary, reduced their investments the most; all these countries were severely hit by the 2007-08 crisis and conducted considerable consolidation efforts including investment reductions.
Across OECD countries, investments amounted to 7.7% of government expenditures in 2017-down from 9.3% in 2007. In 2017, Korea (15.6%), Estonia (13.5%) and Latvia (11.7%) spent the largest share on investments. On the other hand, Israel, Portugal and Belgium allocated the smallest proportion of spending on investments in 2017 (3.6%, 4.1% and 4.4% respectively). While in Portugal and Belgium, this is the result of consolidation efforts, in Israel, as discussed above, it is linked to structural low levels of investment. Investment by functions varies widely; on average over one-third (34.4%) of investment spending corresponds to economic affairs which includes transportation, followed by defence (15.4%) and education (14.1%). Investment in environmental protection represents a mere 4% of total investment and is highest in the Netherlands (12.2%) and Japan (11.3%), both countries with high exposure to environmental and natural risks.
Investment by levels of government varies widely and is different for federal and non-federal countries. While in Belgium (89.8%) and Canada (87.8%), in 2018, sub-central levels were responsible for most of the investment; in Greece and Hungary, the central level carried out over three-quarters of investment, while the local level just under one-quarter.
