Although the recovery of the Austrian economy has proceeded gradually so far, the improvement in Europe is slowly but surely providing Austria with a boost. For example, sentiment in Austrian industry brightened in May thanks to the continued positive sentiment in Europe’s industrial sector. In addition, export orders are now starting to marginally increase, reported UniCredit Bank Austria’s Economics & Market Analysis.
Austria’s economy will receive new stimulus from the export sector in the coming months, as the recovery in Europe is solidifying. The weak euro will have a positive impact despite the fact that economic activity appears to be flagging in certain emerging markets. The turnaround in the export sector will likely be followed by a positive trend in investment activity in the second half of the year. However, because the capacity utilisation of Austria’s economy is currently far below the long-time average at just under 84% (lower than in the Eurozone as a whole), the chances of a considerable improvement in investment are slim for the time being.
UniCredit Bank Austria expects an economic growth of 0.9% in 2015. Consumption in 2016 is expected to support growth, while tax reform will provide an additional effect of nearly 0.4 percentage points. This will lead to a greater growth of GDP in 2016, compared to this year, at an expected 1.5%. Furthermore, investments will be able to gain more momentum in an environment of persistently low interest rates.
Over the first five months of the year, average inflation totalled 0.9% in year-on-year terms, 0.8 percentage points less than in the same period last year. Due to the reversal of commodity prices and demand factors, inflation will gradually climb towards 2% year-on-year in the second half of the year. For 2015 Bank Austria experts expect an average annual inflation rate of 1.2% in Austria. Although this is low, it is still considerably higher than the inflation in most Eurozone countries. And while consumption is being supported by the low inflation, this trend is much less pronounced than in Germany, for example, where inflation is expected to amount to just 0.1% in 2015. Therefore, the significantly higher inflation in Austria compared with Germany is contributing to the current growth gap in the Austrian economy.
Contact:
Tina Fischer
Senior Relationship Manager Austria
tina.fischer@unicreditgroup.at