Austrian Economic Chart Book - Economic and Financial Analysis · observed in the service sector...
Transcript of Austrian Economic Chart Book - Economic and Financial Analysis · observed in the service sector...
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Austrian Economic Chart Book
Inga Fechner and Carsten Brzeski
The golden days are coming to an end
December 2019
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1. Key takeaways – In a nutshell
2. How is the Austrian economy doing?
3. Austria’s weak spots
4. Austria’s current political landscape
5. External trade: The importance of Germany and Eastern Europe
6. What about Brexit?
7. Vivid tourism sector
8. Migration and population
9. Disclaimer
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Austria’s Economic Chart Book
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1. Key takeaways
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• The strong growth years which the Austrian economy experienced between 2016 and 2018 are coming to an end. Due to the international economic slowdown, the Austrian economy lost momentum during the course of 2019. However, the economy is likely to have grown by 1.6% compared to the previous year in 2019. Thanks to Austria’s diversified economic sector and trade structure, global headwinds have been less severe than in other European countries.
• Especially robust domestic consumption, supported by employment and wage and salary growth, as well as the construction sector have been growth drivers. Investment has been buoyant, yet lost momentum over the course of the year.
• Although a political scandal saw the collapse of the FPÖ’s (Freedom Party) coalition with the ÖVP (Austrian People’s Party), several fiscal stimulus measures were undertaken by the former government and also by the transitional government, so private consumption should remain strong in the years ahead. Coalition talks between the ÖVP and the green party over a new government are still ongoing.
• Seeing that the international environment remains challenging in 2020, economic growth is expected to remain modest, but should regain momentum in 2021.
In a nutshell
4
Austria’s economy lost momentum during the course of 2019 given a challenging international environment. Overall however, the economy remains on a solid although slower growth path, with domestic consumption and construction serving as growth drivers
2018 2019* 2020* 2021*
GDP growth 2.4 1.6 1.1 1.4
Inflation 2.1 1.6 1.8 1.8
Unemployment 4.9 4.7 4.8 4.9
Government debt (% of GDP) 74.0 70.6 68.5 66.8
Source: Refinitiv Datastream, all forecasts ING estimates
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2. How is the Austrian economy doing?
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Austria’s peak years have come to an end…
Source: Refinitiv Datastream, ING Economic and Financial Analysis
Austrian economy loses momentum
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…as economic sentiment is deteriorating and the industry sector is stuttering
Economic sentiment has declined in recent months, edging closer to its long-term average
Export-oriented industrial economy has weakened
Source: Refinitiv Datastream, ING Economic and Financial Analysis Source: Refinitiv Datastream, ING Economic and Financial Analysis
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• Having reached an all-time high in 2016 in terms of
unemployment, since joining the EU stemming from a rise
in market participation of women, older people and
immigration, the labour market has improved markedly
thanks to the economic upswing
• Even though the economic dynamic is slowing,
employment growth remains solid
• Austria’s unemployment rate is one of the lowest among
the Eurozone member states
• With labour supply remaining high, the unemployment rate
is unlikely to drop further. From July 2020 onwards a new
legislation comes into force fully opening the Austrian
labour market to Croatian workers and allowing free
movement of workers
8
But the labour market has improved markedly…
Austria’s labour market has improved markedly compared to a peak in 2016
Source: Refinitiv Datastream, ING Economic and Financial Analysis
Austria’s unemployment rate
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…with wages growing…
Wages have been on an upward trend… …and there are still difficulties in filling vacancies, although the jobs market might have peaked
Compensation of employees (%)
Source: OeNB, Statistik Austria, WIFO Source: Refinitiv Datastream, ING Economic and Financial Analysis
Austria job vacancies
-1
0
1
2
3
4
5
6
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Per capita compensation of employees - gross
Per capita compensation of employees - net
Collective wage index
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…fuelling robust domestic consumption
Private consumption has a stabilizing effect on the economy
Although demand remains an important growth driver, it has emerged as the main limiting factor to production
Source: Refinitiv Datastream, ING Economic and Financial AnalysisSource: Refinitiv Datastream, ING Economic and Financial Analysis
Austria – private consumption expenditure Limits to production
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Austria’s inflation rally has subsided…
Austria’s inflation rate is still above the Eurozone’s but the difference is diminishing
• Over the last couple of years, inflation in Austria has been a
lot closer to the ECB’s preferred measure of inflation of
“below, but close to 2%”
• The reasons for Austria’s higher inflation rate were unit
labour costs, administered prices and accelerating inflation
in the service sector. Real compensation of employees has
risen faster than productivity, apparently leading to a pass
through into consumer prices. This pattern can clearly be
observed in the service sector (mainly in tourism)
• Compared to last year, however, we expect inflation to
recede to 1.6% compared to 2.1% in 2018 mainly due to
lower fuel prices and lower costs for communication
Source: Refinitiv Datastream, ING Economic and Financial Analysis
Austria’s inflation rate compared to the Eurozone
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…the fiscal situation has improved…
Government debt is expected to decrease further, although the Austrian fiscal stance is expansionary
Source: Refinitiv Datastream, ING Economic and Financial Analysis
Austria government debt
Source: Refinitiv Datastream, ING Economic and Financial Analysis
Austria government yield
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…and overall lending conditions remain favourable
Corporate demand for credit has eased after being exceptionally strong until 2018, yet remaining at a high level, while private customer demand for loans remains favourable, reflecting the current macroeconomic environment
Source: Refinitiv Datastream, ING Economic and Financial Analysis
Austria – loans to households
Source: Refinitiv Datastream, ING Economic and Financial Analysis
Austria – loans to non financial corporations
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3. Austria’s weak spots
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Structural problems might become a problem for the future…
Proportion of Austria’s population aged 60 years and more (%)
Unemployment rate of elderly declined, but less so than for younger employees
15
17
19
21
23
25
27
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Youth unemployed <25 years 25-44 years Elderly >=45 years
Source: Refinitiv Datastream, AMS, ING Economic and Financial Analysis
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…and digitisation could be expanded
16
Source: European Commission
0
10
20
30
40
50
60
70
80
2019 ranking
Connectivity Human Capital Use of Internet Integration of Digital Technology Digital Public Services
The Digital Economy and Society Index
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Digital skill shortages in Austria are high
17
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
Un
ite
d K
ing
do
m
Hu
ng
ary
Sw
itze
rla
nd
Po
lan
d
Fra
nce
Slo
ven
ia
Be
lgiu
m
Sw
ed
en
Gre
ece
Ire
lan
d
Ge
rma
ny
Cze
ch R
ep
ub
lic
De
nm
ark
No
rwa
y
Ne
the
rla
nd
s
Slo
vak
Re
pu
blic
Po
rtu
ga
l
Au
stri
a
Sp
ain
Ita
ly
Fin
lan
d
2015 or latest year
Source: OECD Economic Surveys: Austria 2019, OECD Skills for Jobs Database
Shortage of knowledge of computers and electronics, skills scale between -1 and 1 (strongest)
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4. Austria’s current political landscape
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The Austrian People’s Party scored even better than in the 2017 election…
Election results in 2017 and 2019 Current seating plan of the National Council –92 votes are needed for a majority
0%
5%
10%
15%
20%
25%
30%
35%
40%
ÖVP SPÖ FPÖ NEOS Greens
National elections 2017 National elections 2019
ÖVP, 71
FPÖ, 30
SPÖ, 40
NEOS, 15
Greens, 26
No party, 1
Source: Republic of Austria Parliament, Federal Ministry of the Interior
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..but the choice of coalition partners is fairly limited
Environmental and climate protection
• Introduction of a CO2 minimum price, revenues are used to relieve business and citizens estimated turnover volume of 8 billion euros, equalling 500 euros per person per year
• 100% of Austria’s electricity demand from domestic renewable sources by 2030, at least 60% of the total energy consumption with renewable energy sources
• Green Change in Agriculture: farmers' incomes should be increasingly secured by the price of the products while small farms will receive basic financial security
• European agricultural subsidies destroy smallholder structures in the global South
✓ Minimum tariffs for CO2 intensive products should be introduced at the EU‘s external border
✓ In coordination with the WTO, CO2 tariffs should be introduced for imports into the European internal market from third countries that do not meet the necessary standards in climate and environmental protection
✓ Ecologization of the commuter rate
• Agriculture: focus on food quality, environmental and climate protection, securing farmers’ incomes and revitalising rural areas
• No cuts in funding on European level, particularly for rural development
Migration and asylum
• Common European strategy with a fair division of responsibilities between the EU member states, distribution key among member states
• Common asylum authority, with all member states being obliged to tackle migration and asylum together or have to reckon with consequences if they refuse to do so
• Border controls at Europe’s external border
• For those who apply for asylum in Austria, a final decision should be taken in the second instance after a fair and constitutional procedure of no more than six months
• Protection of the EU‘s external border has become a priority, rapid strengthening of the EU border management agency Frontex is necessary
• Minimise incentives for people to come to Europe only for the prospect of a better life
• Sanction mechanism on European level for states that wave through illegal migrants
• Ensure that asylum seekers only receive the full minimum level of protection if certain criteria are met, including a certain level of language proficiency
Europe
• EU should develop into a fully-fledged supra-national democracy in which all public decisions are taken transparently
• The European Parliament should be able to take decisions on all matters on an equal footing with the Council, possibility for Parliament to introduce its own legislative proposals
• All Member States' positions in the Council should be made public.
✓ Common foreign and peace policy
✓ Offer a credible accession prospect to the Western Balkans region
• Strengthening subsidiarity in the EU and reducing the size of the EU Commission in the medium term
• Break-off accession negotiations with Turkey
• EU-budget: lean budget, Austria should not pay more into the EU budget than it ahs to date in relation to its economic strength
• Direct election of the President of the EU Commission
✓ Common foreign policy
✓ Offer a credible accession prospect to the Western Balkans region
20
The Austrian People’s Party (ÖVP) is currently in talks with the Green Party to form a new government
Source: Party programmes
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Climate change is becoming more important, throughout the EU…
Source: Eurobarometer Spring 2019
0
10
20
30
40
50
60
Immigration Climate change
Economic situation Member states' public finances
Terrorism The environment
0 5 10 15 20 25 30
Terrorism
Taxation
Economic situation
Government debt
Housing
Crime
Pensions
Unemployment
Immigration
Education system
Rising prices/inflation/cost of living
Health and social security
Environment/climate change
Most important issues facing the EU (%) Most important issues facing Austria at the moment (%)
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…while a majority of Austrians is still optimistic about the future of the EU
22
0 10 20 30 40 50 60 70 80 90
Greece
UK
France
Czech Republic
Italy
EU28
Bulgaria
Sweden
Cyprus
Belgium
Austria
Croatia
Germany
Latvia
Spain
Hungary
Romania
Slovenia
Malta
Luxembourg
Portugal
Slovakia
Finland
Estonia
Netherlands
Poland
Lithuania
Denmark
Ireland
Source: Eurobarometer Spring 2019
Optimism for the future of the EU (%)
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5. External trade
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Austria’s main trading partners…
Germany is Austria’s most important trading partner, making up for more than 30% of Austria’s exports and imports
Source: Refinitiv Datastream, ING Economic & Financial Analysis
0 10 20 30 40 50
Germany
United States
Italy
Switzerland
France
Czech Republic
Hungary
Poland
UK
China
0 10 20 30 40 50 60
Germany
Italy
China
Switzerland
Czech Republic
USA
France
Netherlands
Poland
Hungary
Top 10 export countries (€bn) Top 10 import countries (€bn)
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…with Eastern European countries making up 1/5 of Austria’s import and export share
Germany
30%
Other
49%
Eastern
European
countries
21% Germany
36%
Other
45%
Eastern
European
countries
19%
Source: Statistik Austria, ING Economic & Financial Analysis. Eastern European countries: Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Albania, Slovenia, Croatia, Bosnia-Herzegovina, Kosovo, Macedonia, Montenegro, Serbia, Ukraine, Belarus, Moldova Rep., Russian Federation
Export share (%) Import share (%)
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Germany and China fuel Austria’s negative trade balance
26
Source: Refinitiv Datastream, ING Economic & Financial Analysis
-14 -12 -10 -8 -6 -4 -2 0 2 4 6
Germany
China
Czech Republic
Switzerland
Italy
Hungary
Poland
UK
France
United States
€bn2008-2013 2014-2018
Foreign trade balance with top 10 export countries
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Machinery and vehicles are Austria’s most important export and import goods
Source: WKO, Statistik Austria, as of 2018
4.7
5.7
10.3
11.2
17.7
0 5 10 15 20
Iron and steel
Pharmaceutical products
Electrical machinery and equipment
Motor vehicles
Boilers, machinery and mechanical
appliances
4.3
8.2
9.9
11.4
13.2
0 5 10 15 20
Plastics and articles thereof
Mineral fuels, mineral oils and
products of their distillation
Electrical machinery and equipment
Motor vehicles
Boilers, machinery and mechanical
appliances
Top 5 export goods (% share) Top 5 import goods (% share)
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6. What about Brexit?
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No deal – Impact on Europe and Austria
29
0%
1%
2%
3%
4%
5%
6%
7%
8%
2017 2018
• Belgium, the Netherlands and Ireland are
particularly exposed to a ‘no deal’ Brexit given
their importance in British supply chains
• Around 60% of UK’s marine trade with
Europe* goes to either Netherlands, Belgium
or France.
• Although UK is among Austria's top 20
trading partners with 9th place for exports
and 13th place for imports, the impact of
Brexit on the Austrian economy as a whole is
likely to remain limited in terms of its overall
share (exports 2.8% and imports 1.8%).
• According to ING calculations, GDP could be
0.1-0.3 percentage points lower. In particular,
trade in machinery and vehicles is likely to
suffer. With a share of more than 50% each,
these are both the most important import
and export goods between Austria and the
UK.
*Gross tonnageSource: Refinitiv Datastream, ING Economic & Financial Analysis.
Goods exports to UK (as % of country’s GDP)
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7. Vivid tourism sector
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• The tourism sector generates up to 8.4% of Austria’s GDP
and accounts for 15.3% of GDP together with the leisure
industry, manifesting the importance of these sectors for
the Austrian economy
• In 2018, an estimated number of 674,500 full-time jobs
were directly or indirectly connected to the tourism and
leisure industry
• The length of stay is decreasing: tourists spent on average
4.9 nights in 1990, compared to 3.3 nights in 2018
• The 2019 summer tourist season (May to October) in
Austria recorded an increase of 2.8% year-on-year, with
78.93 million overnight stays, overtaking the record of
78.12 million overnight stays in the 1991 summer season
Austria’s tourism sector is vital for the economy
0 5 10 15 20 25 30 35 40
Poland
USA
Hungary
Italy
Belgium
Czech Republic
UK
Switzerland
Netherlands
Austria
Germany
Source: Statistik Austria, WIFO, Federal Ministry Republic of Austria Sustainability and Tourism, WKO
0
5
10
15
20
25
30
35
40
45
2013 2014 2015 2016 2017 2018
Foreign visitors Domestic visitors Other
Top 10 overnight stays by country (% share)
Tourist expenditure in Austria (€bn)
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8. Migration and population
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Austria's population continues to age
33
Source: Statistik Austria, population forecast 2019
19.4 19.3 19.3 18.8 18.5 18.7 18.7 18.6
61.8 61.557.5
54.9 53.9 52.8 52.4 52.1
18.8 19.123.2 26.3 27.6 28.5 28.9 29.3
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2018 2020 2030 2040 2050 2060 2070 2080
Total population, %
Up to under 20 years 20 to under 65 years 65 and more years
Population forecast for Austria
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The number of asylum applications has declined...
34
Source: Eurostat, ING Economic & Financial Analysis
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Persons
Asylum applicants extra-EU28
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...but integration remains a challenge
35
0
10
20
30
40
50
60
70
Annual average (%)
2017 2018
Source: Federal Ministrey Republic of Austria Europe, Integration and Foreign Affairs, integration report 2019
Unemployment rate by nationality
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