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Robust Industry & Strong Service Sector

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Austria has a highly developed market economy, with strong industrial and service sectors, a skilled labour force and a very high standard of living for its population. Export is regarded as vital to the Austrian economy, while – with an average per capita GDP of about $55,000, as of 2017 – Austria ranks among the richest countries of the European Community

Austria is one of the most stable and robust European member states, with a diverse and healthy economic system. The most significant industries in Austria include construction, electronics and electrics, tourism, food and beverages, logistics and transportation, and the automotive and chemical industries, as well as steel and mechanical engineering.

Austrian industry comprises mainly small and medium-sized enterprises, yet Austria’s industrial sector is nonetheless among the world’s largest: industrial production increased nominally by 28 per cent between 1995 and 2003, to reach a total volume of €90.9 billion, while industry grew by 6.5% in 2017. Back in 2003, the mechanical and steel industry – with €11.4 billion – was the greatest contributors to Austria’s total output, followed by the chemical industry (€10.6 billion) and the electrical and electronics industry (€10.2 billion).

Austria’s top-ten export commodities account for twothirds of the entire export volume. Most exports go to other EC countries, predominantly Germany, while about 15 per cent of Austrian products and services go overseas. The service sector also accounts for some two-thirds of total GDP of €232 billion. Trade and industry make up about a third of GDP, while agriculture contributes two per cent.

As noted, trade with other EU countries accounts for almost 66 per cent of Austria’s total trade exchange. Expanding trade with and investment in the emerging markets of central and eastern Europe is a major element of Austrian economic activity. Trade with these countries accounts for almost 14 per cent of Austrian imports and exports, and Austrian firms have sizeable investments in and continue to move labour-intensive, low-tech production to these countries.

Based on the available data, companies and investors from Austria have been very active in mergers and acquisitions (M&A). Statistics shows that more than 7,183 mergers & acquisitions were recorded between 1991 and the present day, with these transactions having a total value of €261.6 billion. There were 245 M&A deals made in 2017, with a total value exceeding €12.9 billion. This number includes both domestic and international deals, with Germany being the most important partner. To date, a total of 854 German companies have been acquired by Austrian parent companies (outbound). The industry with the largest M&A activity in Austria, in terms of transaction value, has been the financial sector, while the industry with the largest number of transactions has been industrials – representing 19.2%.

Austria can draw on an abundance of resources, with its own natural resources of iron ore, non-ferrous metals, important minerals and soils. The constant growth of the industrial sector, however, increasingly requires supplementary imports. This is also true of fuels, energy resources and the electricity-generating industry. Austria has its own sources of petroleum and natural gas, while the generation of hydroelectric power is constantly being expanded, making Austria the leader in the field of hydroelectric power within the EU. About a third of Austria’s energy consumption is covered by the national energy industry. Up to 70 per cent of energy comes from renewable sources, such as water. Alongside water, wood plays an increasingly important role as a renewable source of energy.

About a sixth of Austria’s three-million- strong wage and salary workforce is employed in the trade and industry sector, which contributes some 13 per cent to the country’s GDP. Tourism is the country’s biggest foreign exchange earner and the fastest growing sector: 220,000 people in 40,000 tourist establishments generate 10 per cent of Austria’s economic output. Some 131 million guests had overnight stays in Austria in 2012.

Expanding trade and investment in the emerging markets of Central and Eastern Europe is a major element of Austria’s economic activity

In Austria, 7.5 million hectares of land are used for agriculture, with cattle farming contributing 30 per cent to the agricultural value-added business. Austria boasts an incredible 18,500 organic farms that add to the country’s reputation as Europe’s deli shop. In the field of agriculture, Austria is witnessing a strong trend towards organic farming – with an overall share of 22 per cent, organic farms in Austria occupy a leading position among EU member states. It is also noteworthy that 47 per cent of Austria is forested.

Among insiders in the wine business – and despite being only a small wine growing country – Austria has gained an excellent reputation for producing some top-rated wines. About 32,000 wineries produce an average of 2.5 million hectolitres of wine annually. Austrian wines are produced mostly from Riesling and Gruener Veltliner grape varieties, while Sauvignon Blanc grapes are also used. Austria’s white wines receive most of the attention, but the reds are also excellent.

Austria is world-famous for its arts and crafts, most notably fine handcrafted items, customised jewellery, ceramics and glassware.

As one of the most prosperous and stable EU member states, Austria offers investors ideal conditions. The Austrian economic system can be characterised as a free market economy with a strong social focus by also taking into account the weaker members of society. Austria also features a tried and tested system of economic and social partnership, which has traditionally played a strong and reconciliatory role in wage and price policies.

In the global-political arena, Austria is increasingly becoming an international meeting point, which is illustrated by the large number of summits and conferences held in the country. At the same time, the country’s relevance as a vital transit country between Europe’s different economic areas is increasing, especially for European energy supplies, including petroleum, natural gas and electricity.

Austria’s fiscal position compares favourably with other euro-zone countries. The budget deficit stood at a low 0.7% of GDP in 2017, while public debt fell again in 2017, to 78.4% of GDP, after reaching a post-war high of 84.6% in 2015. The Austrian government has announced plans to balance the fiscal budget in 2019. Several external risks – such as Austrian banks’ exposure to Central and Eastern Europe, the refugee crisis and continued unrest in Russia/Ukraine – eased in 2017, but remain factors for the Austrian economy. additional risks are also presented by exposure to the Russian banking sector and a deep energy relationship with Russia.

According to the country’s central bank, Oesterreichische Nationalbank, Austrian economic growth strengthened in 2017, with GDP increasing by 2.9%. Austrian exports – accounting for around 60 per cent of the country’s GDP – were up 8.2% in 2017. The same year saw Austria’s unemployment rate fall by 0.3%, to 5.5%, which is low by European standards, but still at its second highest rate since the end of World War II, driven by an increased number of refugees and EU migrants entering the labour market.

Austrian GDP was estimated at $417.4 billion in 2017, with agriculture contributing 1.3%, industry 28.4% and services 70.3%.

The pace of growth has slowed in Austria since the spring of 2018, though it still reached 2.7% for 2018 as a whole – representing the highest increase since the recovery immediately following the financial crisis of 2011. Still buoyant global trade boosted Austrian exports. Together with the domestic economy, economic growth was once again above average compared to the rest of Europe, driven by continued strong investment activity and the strongest levels of consumption in over a decade.

The slower pace of the global economy is responsible for the more moderate growth forecasts for the Austrian economy in the second half of 2019 and in 2020 compared to 2018. Momentum in exports is set to remain modest in the second half of 2019, despite initial signs of global trade stabilising. However, driven by private consumption, domestic demand is expected to provide sustained growth of 1.4% in 2019 and 1.3% in 2020.