Research Euroland: Fact Book Austria‏

This fact book on Austria gives a brief overview of the main aspects of the Austrian economy. It includes many informative charts and tables. The next fact book we plan to publish is on Belgium. The idea is that these fact books can be used as a quick reference point for key ratios, etc.

Austria is "the gateway to eastern Europe" and 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 enlargement of the EU. The current account is in surplus. Austria is highly competitive because of low unit labour costs implying high productivity.

Austria does not currently fulfill the Maastricht criteria. The government budget deficit was within the 3% limit pre-crisis but fell sharply in 2009. The rise in expenditure caused partly by stimulus packages. Government debt has been above 60% since 2000 and is now at about 75% of GDP. That said, the situation is not alarming and both the government budget deficit and government debt are below the euro area average. In addition, we expect the budget deficit to fall below 3% in the near future. Austria lost its AAA-rating in January along with other countries such as France.

Austria’s GDP has outgrown the euro area average and is now higher than it was before the crisis. The recovery has been driven mainly by exports. Employment was temporarily hit during the crisis but the unemployment rate is now back around the pre-crisis level at 4-5% which is the lowest in the euro area. Unemployment expectations have increased lately.

One of the most problematic factors related to doing business in Austria is restrictive labour market regulations, especially because of a strong labour movement. Austria is in need of more flexibility in the labour market in the light of an ageing population and the low fertility rate.

There has not been a fall in house prices in Austria during the crisis, as has been the case in most other European countries. Indeed, house prices are still increasing and are currently at an all-time high.

Austria’s banks have focused in particular on activities in Eastern Europe, especially Romania, the Czech Republic and Hungary. The consolidated claims on countries in central, eastern and south-eastern Europe amount to EUR216bn (or 62% of total international claims) according to the National Bank of Austria (Osterreichische Nationalbank). 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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