Austria

External challenges, strong domestic fundamentals

AA1

LOW RISK for entreprise

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

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GDP	USD 429.0bn (World ranking 25, World Bank 2020)
Population	8.9mn (World ranking 97, World Bank 2020)
Form of state	Parliamentary republic
Head of government	Karl Nehammer (Chancellor)
Next elections	2022, legislative

Competitive high-income economy
Good budgetary position
Low external imbalances

Banking sector weaknesses
High export-dependence
Elevated public debt level
Unfavorable demographics

Domestic demand to drive economic growth

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.

Public finances: Favorable debt dynamics

Austrian public finances have recorded a notable improvement in recent years. During the Eurozone debt crisis, government debt as a percentage of GDP rose significantly. But in 2018, it came down to 74%, from 85% in 2015, due to higher fiscal discipline, buoyant economic growth and a declining interest burden, thanks to the low rate environment. In fact, in 2018, Austria posted its first budget surplus since 1974. Slowing GDP growth will provide some headwind to the government’s consolidation course, but we still expect the debt-to-GDP ratio to fall below the 70% mark by end 2020.

Trade structure by destination/origin

(% of total, annual 2020)

Exports	Rank	Imports
Germany 29.8%	1	40.8% Germany
United States 6.1%	2	6.0% Italy
Italy 6.1%	3	5.5% Switzerland
Switzerland 5.4%	4	4.4% Netherlands
France 4.2%	5	4.3% Czech Republic

Trade structure by product

(% of total, annual 2020)

Exports	Rank	Imports
Road Vehicles 9.3%	1	10.1% Road Vehicles
Medicinal and pharmaceutical products 7.8%	2	7.1% Electrical machinery, apparatus and appliances, n.e.s.
Electrical machinery, apparatus and appliances, n.e.s. 7.3%	3	6.4% Medicinal and pharmaceutical products
Other industrial machinery and parts 6.0%	4	5.4% Other industrial machinery and parts
Specialised machinery 5.7%	5	4.6% Miscellaneous manufactured articles, n.e.s.

The payment behaviour of domestic companies is good and the EU legal framework provides reliable tools when it comes to late payment issues.

Low
Medium
Sensitive
High

Payments
Court proceedings
Insolvency proceedings

Payments
Court proceedings
Insolvency proceedings

The court system is efficient and reliable overall, but pre-legal action conducted by specialists remains the most effective method of collecting debt.

Austrian insolvency law aims to rescue companies in order to increase the chances of recovering debts. It establishes a legal requirement for reorganization plans to provide a minimum quota of 20% in 2 years. However, it is rare for unsecured creditors to recover significantly where reorganization fails or bankruptcy proceedings are started from the beginning.