Austria: Economic and Political Overview
In this page: Economic Outline | Political Outline | COVID-19 Country Response
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
The Austrian economy is deemed one of the most stable in Europe. The country relies on a very strong network of export-focused SMEs, excellent academic standards and significant spending for research and development. Following the setback caused by the COVID-19 pandemic, Austria’s economy registered a strong rebound in 2021. The country’s output expanded strongly in the first half of 2022, driven by robust private consumption, and despite the negative affect of the energy price shock (which caused a contraction in the second half of the year) the overall growth was estimated at 4.7%. Economic activity is set to slow down in 2023 due to lower household consumption and business investment, with the IMF forecasting growth at 1% before increasing to 1.9% the following year; whereas the European Commission’s projections are more conservative (at 0.3% and 1.1%, respectively).
Thanks to the phasing out of support measures taken in the context of the COVID-19 pandemic (including short-time work, fixed cost subsidies, as well as other transfers), the government headline deficit decreased to 2.6% in 2022 from 4.5% one year earlier (IMF). Despite sluggish growth, it should follow a downward trend in 2023 and 2024 (at 1.2% and 1.1%, respectively – 2.8% and 1.9% as per the EU Commission projections). Similarly, the debt-to-GDP ratio decreased to 78.5% in 2022 on the back of strong nominal GDP growth and is forecasted at 77.3% this year and 75.6% in 2024. Inflation spiked at 7.7% in 2022 driven by electricity and gas prices, but is expected to gradually decrease to 5.1% in 2023 and 2.5% in 2024. In order to mitigate the consequences of high energy prices, an electricity cap for households came into effect by the end of 2022 and should be in force until mid-2024.
Austria has a low percentage of unemployment compared to other countries in the Eurozone and the EU, as well as global comparison. After picking in 2021, unemployment decreased to 4.5% last year. The participation of women and older workers in the labour market is expected to increase over the forecast horizon outpacing employment growth, thus unemployment rate should remain stable. Nominal wages are expected to increase, however, due to the effects of inflation there will be real wage growth only in 2024. Overall, Austrians enjoy one of the highest GDP per capita (PPP) in Europe, estimated by the IMF at USD 66,680 in 2022.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 434.88 | 480.69 | 471.69 | 515.20 | 530.11 |
| GDP (Constant Prices, Annual % Change) | -6.5 | 4.6 | 5.0 | 0.4 | 1.1 |
| GDP per Capita (USD) | 48,857 | 53,529 | 52,265 | 56,802 | 58,155 |
| General Government Balance (in % of GDP) | -4.9 | -4.8 | -3.7 | -2.5 | -1.0 |
| General Government Gross Debt (in % of GDP) | 82.9 | 82.3 | 77.8 | 74.9 | 72.6 |
| Inflation Rate (%) | 1.4 | 2.8 | 8.6 | 8.2 | 3.0 |
| Unemployment Rate (% of the Labour Force) | 5.5 | 6.2 | 4.8 | 5.3 | 5.6 |
| Current Account (billions USD) | 12.95 | 1.70 | 1.55 | 5.98 | 3.32 |
| Current Account (in % of GDP) | 3.0 | 0.4 | 0.3 | 1.2 | 0.6 |
Source: IMF – World Economic Outlook Database, Latest data available.
Note : (E) Estimated data
Out of its 8.91 million population, Austria has a labour force of about 4.5 million people, of whom many are highly educated and skilled. The agricultural sector employs 4% of the active population and represents 1.1% of GDP (World Bank, latest data available). Cattle farming and viticulture are the country's main agricultural activities. Organic farming is incredibly popular in Austria: according to the latest available data (IFOAM), 23% of all its farms are organic and cover over a quarter of the total agricultural area, the highest rate in the EU and the second in Europe after Liechtenstein. Austria benefits from significant subsidies from the European Union provided by the Common Agricultural Policy. Consequently, agricultural exports are continuously increasing. The regions of Lower Austria, Styria and Upper Austria are those with the highest number of agricultural and forestry holdings (Statistics Austria).
The industrial sector, which is comprised of SMEs connected to the Central European markets, represents 25.7% of the GDP and employs one-fourth of the active population. The manufacturing sector represents 17% of GDP (World Bank). The main industrial sectors are the metal industry, electrochemistry and engineering. Over the past fifteen years, Austria has successfully implemented policies for the economic specialization of each region (Lander): Upper Austria (iron, steel, chemical and mechanical engineering), Salzburg (electrics, wood and paper), Vorarlberg (textile, clothing), Carinthia (wood, pulp and paper industry), Styria (automobiles, manufacturing) and Vienna (financial services). The renewable energies sector, especially hydroelectric power, is booming and its performance has exceeded those of the tourism and construction sectors, while the mechanical engineering sector grew by 140% in the last 20 years, with a pace ten times higher than the euro-area average. After suffering during the coronavirus pandemic, industrial production has been recovering firmly in 2022 (it was 7.6% higher in August 2022 than in the year-earlier period – Statistics Austria).
The services sector dominates the economy, contributing 62.6% of GDP and employing 71% of the country's active population. Every sixth job is provided by tourism, which has a major impact on the country’s economy. According to the last available information from the Austrian Statistical Office, tourism accounts for 4.1% of the country’s GDP, with an added value (direct and indirect) of more than EUR 16.6 billion. However, these figures are much lower than the pre-COVID level (7.6% of GDP and EUR 30.3 billion, respectively).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 3.7 | 25.4 | 71.0 |
| Value Added (in % of GDP) | 1.2 | 25.8 | 62.4 |
| Value Added (Annual % Change) | 4.5 | 6.8 | 2.8 |
Source: World Bank, Latest data available.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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