Economic Fact Book: Austria‏

Austria is a small open export-oriented economy. Its most important trading partners are the eurozone and Eastern Europe. Exports to Eastern Europe have risen substantially since the eastern expansion of the EU. The current account is in surplus. Austria is highly competitive due to low unit labour costs implying high productivity.

The budget deficit is below 3% of GDP, which complies with the Maastricht criteria but the government debt has been above 60% since 1993 and is now close to 75% GDP. The government debt is below euro average, and the situation is not alarming. The S&P stripped Austria of its AAA-rating in January 2012. Austria still has a AAA rating from Fitch and Moody’s, although Moody’s has Austria on negative outlook.

Austria’s GDP has outgrown the euro area average, and is now higher than it was before the crisis. Recovery has been driven mainly by exports. Employment was hit temporarily during the crisis, but unemployment rate is now below 5%, he lowest in the euro area.

Austria is ranked number 29 in the World Bank’s Doing Business report 2013. The two main problems are that it is difficult to start a new business, and investor protection is weak. Another problematic factor related to Austria’s competitiveness are restrictive labour market regulations, mostly because of a strong labour movement. Austria is in need of more flexibility in the labour market, in light of an ageing population and low fertility rate.

House prices fell temporarily during the crisis, but are now back at an all-time high. At the current level, it does not seem to be a bubble.

Austria’s banks have focused in particular on activities in Eastern Europe, especially Romania, the Czech Republic and Hungary. The exposure to Eastern Europe caused problems during the financial crisis, and the government had to provide bank support to the most vulnerable banks.

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