AUSTRIA

Following three years of super-charged growth above +2%, economic momentum has cooled down notably in Austria. Slowing global economic growth and elevated political risks have weighed on the performance of Austrian exports. The weakness has affected the country’s industrial sector in particular, while services have held up for now. After all, private consumption has proven remarkably resilient, thanks to the very favorable labor market situation, with unemployment registering below the 5% mark. Meanwhile, inflation has recently slowed down to below 2%, supporting household purchasing power. Investment activity has also proven rather robust despite the weaker export performance. Nevertheless, given the openness of the Austrian economy, domestic demand is not immune to external headwinds. The longer the global economic soft patch and elevated uncertainty persist, the more the Austrian economy will be affected. With trade uncertainty unlikely to fade before early next year — when we expect the US-China trade dispute to deescalate in the face of slowing U.S. GDP growth — we estimate Austrian GDP growth to slow to +1.5% in 2019, before accelerating to +2% in 2020.  Inflation, meanwhile, should come in at 1.8% and 1.9% in 2019 and 2020, respectively.