Economic and Political Overview

flag Austria Austria: Economic and Political Overview

In this page: Economic Outline | Political Outline | COVID-19 Country Response

 

Economic Outline

Economic Overview

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. Public and private consumption are likely to buttress the domestic economy with households benefiting from a tight labour market and higher wages. Following the setback caused by the COVID-19 pandemic, Austria’s economy registered a strong rebound in 2021, with a GDP growth estimated at 3.9% by the IMF. Private consumption and considerable increases in investment were the main drivers, together with the partial recovery of the tourism sector. According to the IMF's forecasts, the economic expansion should accelerate to 4.5% this year before setting around 2.1% in 2023 (4.9% and 1.9%, respectively, as per the EU Commission projections).

Due to the economic crisis triggered by the COVID-19 pandemic, Austria's public debt has increased, jumping to 84.2% of GDP in 2021 from a pre-pandemic level of 70.5%. Robust nominal growth and further reduction in the headline budget deficit should pave the way for a progressive decrease of the debt, forecasted at 81.1% in 2022 and 79.8% the following year (IMF). The fiscal measures taken to mitigate the socioeconomic consequences of the pandemic and the decline in government revenues prompted a budget deficit of 4.8% in 2021. Nevertheless, the headline deficit is forecast to fall well below the 3% threshold over the forecast horizon (2.7% this year and 1.6% in 2023 – IMF). Rising energy prices drove headline inflation to 2.5% in 2021. The index should gradually decrease to 2.4% in 2022 and 2% in 2023.

Austria has a low percentage of unemployment compared to other countries in the Eurozone and the EU, as well as global comparison. Despite the recession triggered by the COVID-19 pandemic, the unemployment rate increased only marginally: at 6.4% in 2021, it is expected to follow a downward path this year (6%) and the next (5.5% - IMF). In the long term, labour shortages could limit economic growth, and persistent global trade tensions represent a further downside risk. Overall, Austrians enjoy one of the highest GDP per capita (PPP) in Europe, estimated by the IMF at USD 59,410 in 2021.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 445.13e432.52e481.21520.34545.76
GDP (Constant Prices, Annual % Change) 1.4e-6.2e3.94.52.1
GDP per Capita (USD) 50,247e48,593e53,79357,87960,404
General Government Balance (in % of GDP) -1.2-6.2e-4.8-2.7-1.6
General Government Gross Debt (in % of GDP) 70.583.2e84.281.179.8
Inflation Rate (%) 1.51.4e2.85.62.2
Unemployment Rate (% of the Labour Force) 4.85.4e6.46.05.5
Current Account (billions USD) 12.6510.81e7.7410.419.73
Current Account (in % of GDP) 2.82.5e1.62.01.8

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

 

Main Sectors of Industry

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 1.2% 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 industrial sector, which is comprised of SMEs connected to the Central European markets, represents 25.7% of the GDP and employs 25% of the active population. 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.

The services sector dominates the economy, contributing 62.8% 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 7.9% of the country’s GDP, with an added value (direct and indirect) of more than EUR 29.1 billion. Nevertheless, in 2021 the sector was impacted by further lockdown measures taken by the government to contain a new wave of the COVID-19 pandemic.

 
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 25.7 62.8
Value Added (Annual % Change) 0.2 -5.6 -6.1

Source: World Bank, Latest available data.

 

Find more information about your business sector on our service Market Reports.

Indicator of Economic Freedom

Definition:

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.

Score:
73,9/100
World Rank:
25
Regional Rank:
13

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

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.

Score:
7.65/10
World Rank:
18/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.

 

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Political Outline

Current Political Leaders
President: Alexander VAN DER BELLEN (since 26 January 2017)
Chancellor: Karl NEHAMMER (since 6 December 2021)
Next Election Dates
National Council: 2024
Presidential: April 2022
Current Political Context
The Austrian political landscape has been characterized by an increasing polarization in the past few years. The year 2021 saw multiple changes at the head of the national government: in October Chancellor Sebastian Kurz, implicated in a corruption affair and whose centre-right cabinet saw the resignation of several ministries, decided to quit his post and was replaced by Alexander Schallenberg. The latter’s office, however, lasted less than two months, as in early December Schallenberg resigned in favour of Karl Nehammer, who had previously been appointed as leader of the ÖVP by the federal party committee. The cabinet reshuffle that followed Nehammer’s appointment saw Schallenberg returning to his previous post as foreign minister, as well as newly appointed finance, interior and education ministers.
Main Political Parties
Austria has a multi-party system:

Austrian People’s Party (ÖVP): centre-right, Christian democratic and conservative
Social Democratic Party (SPÖ): centre-left,
Freedom Party (FPÖ): right-wing, nationalist and anti-immigration
The Greens (GRÜNE): centre-left
The New Austria and Liberal Forum (NEOS): centre, liberal
Type of State
Federal Republic based on parliamentary democracy, composed of nine States (Bundesländer).
Executive Power
The President is the Chief of State, while the Federal Chancellor is the Head of Government. The Federal Chancellor enjoys executive powers. The President is elected by direct popular vote for a six-year term and the Chancellor is traditionally chosen by the President from the majority party in the National Council. The Council of Ministers is chosen by the President on the advice of the Chancellor.
Legislative Power
The legislature in Austria is bicameral. The parliament consists of two chambers: The National Council (the lower house) whose 183 members are elected by direct popular vote to serve four-year terms, and the Federal Council (the upper house) whose 61 members are elected by provincial parliaments to serve five- or six-year terms. The President can dissolve the National Council on the recommendation of the Chancellor. The Federal Council only reviews legislation passed by the National Council and can delay but not veto its enactment. Most authority, including that of the police, rests with the federal Government but the states have considerable responsibility for welfare matters and local administration.
 

Indicator of Freedom of the Press

Definition:

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.).

World Rank:
17/180

Source: World Press Freedom Index, Reporters Without Borders

 

Indicator of Political Freedom

Definition:

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.

Ranking:
Free
Political Freedom:
1/7
Civil Liberties:
1/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in the Austria, please consult the official data on the Federal Ministry of Social Affairs, Health, Care and Consumer Protection website (in German). Daily reports are published by the Ministry of Internal Affairs.
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in the Austria and the current sanitary measures in vigour, please consult the portal Austria.info.

Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions

For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the pages dedicated to the Austrian Customs on the Ministry of Finance’s website.
The “Guidelines for border management measures to protect health and ensure the availability of goods and essential services” issued by the European Commission can be consulted
here.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Austria on the
International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For the information on the economic recovery scheme put in place by the Austrian government to address the impact of the COVID-19 pandemic on the Austrian economy, please visit the official Business Services portal (Unternehmensservice Portal, in German). For further details, consult the website of the Federal Ministry of Labour, Family and Youth (in German, as the English version provides less information).
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the websites of
the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Austrian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Austria in the IMF’s Policy Tracker platform.

Support plan for businesses
For the information on the local business support scheme established by the Austrian government, consult the Austrian Business Agency website. Further info can be accessed on the Business Services portal (Unternehmensservice Portal, in German).
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
For the up-to-date information on possible support plans for exporters in Austria, if applicable, please consult the website of the Austrian Business Agency.
The European Commission adopted a Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.
 

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Latest Update: June 2022