Austria’s Economy in 2009
Read here about the up and downs of 2009 for the Austrian Economy
Worldwide Economic Recovery
According to the most current data on real GDP-growth the world economy seems to have overcome its deepest recession since World War II. Due to extensive stimulus packages and the drive of emerging economies most industrialized countries started to recover in the 3rd quarter of 2009. Even though the forecasts are encouraging monetary issues and problems of weak international demand remain.
Austrian Economy recovering faster than expected
After an economic decline in the first semester of 2009 (1st quarter -1,5%, 2nd quarter -0,9 %), the 3rd and 4th quarters recorded growth rates of 0,5%. In an attempt to quantify the impact of the global crisis on the Austrian economy Vienna based Raiffeisen Zentralbank (RZB, http://www.rzb.at) estimates a directly related GDP decline of 3.5% in 2009.
Despite this positive trend at the end of 2009, recent economical forecasts draw a mixed picture. Problems include the low level of orders in the manufacturing industry and the fact that – according to Mr. Nowotny, governor of the Austrian National Bank – the actual growth rate hinges on temporary facts.
A slowdown of the GDP growth during 2010 is not an unlikely scenario.
Price decreases as a result from lower oil prices
Amid the steady decline of oil prices (from USD 149 in 2008 to USD 40 in mid 2009) at some stage even deflation seemed to be possible for 2009. As oil prices recovered in the last months the average inflation amounted to around 0,5%, the lowest rate in 50 years.
Retail and private consumption – strong pillars in the crisis
In 2009 relatively high wage increases, the low inflation, a swift tax reform as well as monetary incentives for the purchase of cars compensated the negative effects of the global crisis on the retail sector. Retail turnover is expected to boast a growth of approximately 1% in 2009.
According to the RZB the upbeat trend might dip with the rise in unemployment numbers, the low or not existing increase of real wages.
Unemployment lower than expected
The average unemployment rate in 2009 amounted to 4.6% (Eurostat-Definition). At the end of 2009 the unemployment rate of 4,8% was lower than expected.
Due to the flexible application of short-term work and the cooperation of labor unions and employers exploding rates of unemployment as in other European countries could be avoided. Until August 2009, however, 67.000 jobs were lost.
A clear outlook for 2010 is yet difficult.
Austrian exports recover after dramatic downturn
The fall of 2008 saw an unprecedented and sudden slump of exports. Since spring 2009 the recovery of global demand results in a slow recovery. Still, the Austrian National Bank, estimates a decline of exports by 12.9% in 2009. More pessimistic estimates quantify the decrease at up to 23% percent, as orders in several key export industries remain low.
Austrian banks affected by crisis in Eastern Europe (CEE)
At the end of 2008 the market share of Austria’s banks held in Central and Eastern Europe (excluding Russia) added up to 22%. The rapid downturn in those countries resulted in downgrading credit ratings of Austrian banks with massive CEE-exposure. In April Nobel Prize winner Paul Krugman predicted that Austria, Ireland and Iceland would face national bankruptcy. As Mr. Krugman’s assumptions on the Austrian economy were based on inaccurate estimates of the Internation Monetary Fund, IMF-president Dominique Strauss-Kahn publicly apologized and Austria’s top ratings were confirmed by all renowned rating agencies.
By the end of 2009 Austria’s three biggest banks have already returned to profit. Austria remains a strong and dedicated investor in Eastern Europe.
Tourism remains strong and stable
Tourism is another main pillar of the Austrian economy, accounting for 8.2% of the GDP in 2009. After the all time record in 2007/2008 the winter season from November 2008 to April 2009 was almost equally successful. The slight drop (-1.2%) of foreign arrivals was compensated by the increasing number of domestic tourists. The total revenue decreased only 0.4% (compared to the highest revenues on record in 2008).
Summer tourism was equally positive. Between May and October 2009, 17.2 million foreign tourists arrived in Austria, a decrease of merely 0.5%. With 19.9 million overnight stays the Austrian domestic tourism was able to outnumber the record summer season in 1991 by 2.0 percent.