On the back of the fall in capital accumulation and labour utilisation, euro area potential output growth declined from a level close to 2% in the years preceding the crisis to less than 1% on average between 2008 and 2012.
Notably, total factor productivity, which gauges the efficiency of the use of the factors of production, even though subdued, contributed only marginally to this decline.19 However, over the medium to long term, cyclical factors dragging down potential output are expected to fade, with investment recovering through the normalisation of the credit channel and net immigration, which also has an indirect impact through an increase in the fertility rate, providing renewed support to the employment contribution.