Investment in Austria

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Austria - Investment

Economic growth cools in Q2

Austria’s economy expanded 0.5% quarter on quarter in Q2, down from the 1.5% expansion logged in the first quarter. The slowdown was even more pronounced on an annual basis, with the economy growing 4.7% over the same period a year prior in Q2. This was down from the 8.7% increase recorded in the first quarter.

The quarterly slowdown was primarily driven by a contraction in household spending (Q2: -1.9% qoq; Q1: +0.8% qoq). Household spending declined on the back of greater price pressures in the period due to the fallout from the war in Ukraine, which saw commodity prices spike. The conflict also weighed on business confidence, which moderated notably in the period—Business sentiment fell into pessimistic territory in May–June. In turn, fixed investment growth eased to 1.2% in the second quarter, from 1.6% in the first. Meanwhile, government consumption growth flatlined.

On the external front, the war seemingly did not leave its mark yet despite Austria’s reliance on Germany. Exports of goods and services grew at a stronger 2.7% pace in the second quarter, up from the first quarter’s 2.3%. Imports of goods and services growth, meanwhile, moderated from 3.7% in the first quarter to 0.5% in the second.

Turning to the third quarter, the war on Europe’s eastern flank is set to continue dampening household spending momentum, as commodity prices remain elevated, fueling inflation. Moreover, the country’s industrial sector is highly export-orientated and geared towards Germany. International sanctions, supply chain problems, softer demand from Germany and other European markets, as well as high commodity prices, will weigh on the industrial sector. More positively, a tighter labor market and the government’s third fiscal relief package (announced in mid-June) should provide some respite for the economy, although the balance of risks is clearly skewed to the downside.

Margarita Grushanina, analyst at Erste Bank, commented:

“The current enormous global uncertainty and the clearly downward-pointing risks speak for cautiousness in estimating the economic development in the coming quarters. For 2022 as a whole, we expect GDP growth of 3.8%. For 2023, we expect a slowdown to 1.8%, due to spillovers from the war in Ukraine and the adverse effects of high inflation.”

FocusEconomics panelists project that the economy will expand 4.4% in 2022, which is unchanged from last month’s estimate. For 2023, panelists expect the economy to grow 2.2%.

Austria - Investment Data

2015   2016   2017   2018   2019  
Investment (annual variation in %)2.3  4.1  4.0  3.9  2.7  

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Austria Facts

Value Change Date
Bond Yield0.030.40 %Jan 01
Exchange Rate1.120.65 %Dec 31

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