Population 8.45 million
GDP 391.469 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
2.1 |
2.7 |
0.7 |
1 |
|
Inflation (yearly average) (%)
|
1.7 |
3.6 |
2.4 |
2 |
|
Budget balance (% GDP)
|
-4.5 |
-2.5 |
-3.2 |
-2.6 |
|
Current account balance (% GDP)
|
3 |
2 |
1.8 |
2 |
|
Public debt (% GDP)
|
72 |
72.4 |
75 |
75 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Central position in Europe and attractive quality of life
- Low household and corporate debt
- Manufacturing competitiveness with niche products and high productivity
- High employment rate and low youth unemployment (role of apprenticeships)
- Major tourist attractions
WEAKNESSES
- Strong industrial specialisation (transport, machine tools, building materials, chemistry)
- Dependence on German and Central European economies
- Banking sector vulnerable to the Central and Eastern European economies
- Taking responsibility away from the Länder and municipalities (one third of spending but taxation chiefly federal)
- Low level of employment among older citizens with an effective retirement age below 60
- Demography not very dynamic
Risk assessment
Slight acceleration in activity due to positive contribution of trade
Activity could accelerate slightly in 2013 due to a positive contribution from external trade. Exports represent 56% of GDP and Germany is the top destination (33% of the total), before Italy (8%), the United States (6%), Switzerland (5%) and the Czech Republic (4%). The eurozone absorbs 60% of exports, the countries of Eastern and Central Europe 18% and Asia only 10%. The Austrian economy is therefore closely correlated with that of Germany. Imports will grow less rapidly in line with consumption and investment. Admittedly, households have little debt and benefitted from wage rises in 2012, but they will be up against slower job creation and, in particular, the fiscal package adopted in 2012 whose savings measures will be spread out until 2016. It includes freezing civil service wages and recruitment in 2013, stricter civil service retirement conditions, cuts in unemployment benefits and higher social security contributions for some categories. There will be little business investment and house building could decline by 4%.
Relatively strong public finances
Thanks to the fiscal package, the fiscal deficit which widened in 2012 with the burden of the Greek bail-out and the recapitalisation of certain banking institutions, partially or totally nationalised following the crisis, is expected to fall below the 3% barrier. Among the measures planned are the abandonment of several railway projects, a reduction in local authority spending, higher taxes on business property transactions and hospital reform. The authorities are also counting on the payment by Switzerland of a tax levied on investments made by Austrians in that country, as well as payment of the health insurance surplus into the budget. This is expected to more than compensate for a further capitalisation of the banking institutions at up to 0.8% of GDP. These measures are expected to stop the growth of public debt (70% held by foreign creditors), which, according to a law adopted in 2012, must fall to 71% in 2016, with a structural deficit standing at 0.35%. The relative soundness of public finances is reflected in the low borrowing rate for the government. The November 2013 legislative elections are not expected to change these policies, even if the traditional centre-left Social Democratic party (SPÖ)-centre right People’s party (ÖVP) coalition loses with the rise of the parties of the right.
Trade deficit offset by services surplus
The traditional current account surplus fell after 2008 due to the appearance of a trade deficit, while, until then, trade had been balanced. Exports to Europe fell and this could not be offset by the development of sales outside this region or by sector diversification, particularly through the agribusiness sector. This deficit is largely offset by the surplus in the balance of services, both in tourism and services to business.
Businesses in good health despite a weak banking sector
The situation of businesses remains satisfactory. Overall, they are able to self-finance their investments and are, therefore, not dependent on the financial markets or the banks. The latter are very exposed to central and eastern European countries, particularly Rumania, Hungary and Croatia where most of their foreign assets are concentrated. They have already had to recapitalise several of their local subsidiaries. However, they intend to remain on these developing markets. Conversely, their exposure to countries on the southern periphery of the eurozone is slight. The country’s biggest beneficiary banks - profit-making - have sufficient resources for recapitalising and meeting the ratios set by the new regulations. The smaller institutions have in some cases had to be partially or totally taken over by the state, which continues to recapitalise them and to sell some of their assets.
