Austria

Broad-based economic upswing

Country Rating AA1

Strengths

  • Low systemic political risk
  • Good regional and international relations, EU membership
  • Eurozone membership provides low transfer and convertibility risk
  • Consistent current account surpluses since 2002
  • Strong business environment

Weaknesses

  • High trade dependency on Germany
  • Relatively high public debt
  • Banking sector vulnerabilities due to large exposure to Central and Eastern Europe, including Russia



Economic Overview



Robust and stable expansion

The Austrian economy currently finds itself in a period of very strong and stable economic expansion, which is supported both by domestic and external demand. Following real GDP growth of 0.9% in the first quarter of 2017, growth came in at 0.8% in both the second and third quarter (q/q, seasonally adjusted). Export activity has gained considerable momentum since the fourth quarter of 2016. Austrian exporters benefit from the economic recovery in the eurozone and the strong demand from central and eastern European countries. The loss in export dynamics in the third quarter has to be seen as a natural normalization, following a very dynamic development in the preceding quarters. Export-oriented companies continue to assess their order books very positively. Thus exports are likely to provide growth stimulus well into next year.

 


Economic sentiment at multi-year high

In November the Purchasing Managers´ Index (PMI) for the manufacturing sec¬tor reached its highest level for more than six years. It currently stands at close to 62 points, well above the 50 point-threshold. Values above this threshold indicate an overall improvement in the manufacturing sector. Confidence among consumers has also improved considerably in the course of this year. In November it reached its highest level since February 2011 (EU Commission data).

 


Strong economic expansion to continue

The economic upswing has finally reached the labor market. The number of employees increased by 65,000 in the first three quarters of 2017. At the same time unemployment is trending downwards. Supported by these positive labor market developments, private consumption is likely to grow strongly next year as well. We have penciled in an increase of 1.7% in real terms (2017: +1.5%). Prospects for investment are positive as well. Capacity utilization is clearly above its long-term average, pointing to continued strong investment activity in the industrial sector. All in all, we expect full-year real GDP to expand by 2.9% in 2017 and by 2.2% in 2018. The contribution of net exports will likely be less pronounced next year than in 2017 (+0.3% versus +0.6%) as export growth will be more or less in line with import growth.

 

Last review: 2017-12-01