Europe’s manufacturing sector is seen as the key to long-term economic growth. It is believed that a 1% increase in industrial production leads to a 0.5% rise in GDP. Despite this, the sector’s contribution to the economy has been declining, with the industry’s share of value-added dropping from 15.4% in 2000 to 13.7% in 2007, and to 15.3% in 2017.
The manufacturing sector’s performance varies across regions, with Germany leading the pack and Southern Europe lagging behind. Germany’s manufacturing sector contributes 23% to its GDP, while in Italy, Spain, and Greece, the figures are 16%, 13%, and 8% respectively.
To boost manufacturing, Europe needs an industrial policy that focuses on innovation and skills. The policy should aim to increase the sector’s productivity and competitiveness. This could be achieved by investing in research and development, improving the quality of education, and promoting entrepreneurship.
Increasing the sector’s share of value-added could also help. This could be done by promoting the development of high-value-added sectors such as pharmaceuticals, machinery, and automotive. However, this requires a supportive business environment, including efficient public administration, access to finance, and effective competition policy.
Overall, Europe’s manufacturing sector has the potential to drive economic growth, but this requires a comprehensive and effective industrial policy.
Go to source article: http://www.bruegel.org/nc/blog/detail/article/1185-manufacturing-europes-growth/