Economy must brace for tough time, say analysts

The Austrian economy will grow less strongly than initially expected, according to the Organisation for Economic Co-operation and Development (OECD).

OECD research shows that Austria’s gross domestic product (GDP) will rise by 0.6 per cent from 2011 to 2012. Only in May, the organisation announced it expected the GDP to climb by 2.1 per cent. OECD said yesterday (Mon) insecurities and cautiousness due to the volatile economic climate had a negative impact on Austria’s foreign trade activities and investments in the country.

OECD also found that the GDPs of Italy (minus 0.5 per cent), Greece (minus three per cent) and Portugal (minus 3.2 per cent) will decrease in 2012. The average GDP of the Eurozone’s 17 member countries will inch up by just 0.2 per cent from the current year to 2012, according to the organisation which has 34 members. OECD experts said in May that the Eurozone’s GDP could improve by two per cent on average from 2011 to 2012. The GDP of Germany, the strongest economy in Europe, will climb by 0.6 per cent instead of 2.5 per cent, OECD said yesterday.

The intense business activities of Austria’s leading banks in Eastern Europe (EE) – a region seen as an economic risk zone due to the effects of the downturn of the global economy – and the country’s trade deficit were identified as key questions deciding over the development of the Austrian GDP in the coming months. Austrian companies’ imports in the first half of this year were worth 85.4 billion Euros, 18.5 per cent more than goods shipped to the country in the first six months of 2010. The value of exports improved by 15 per cent to 80.1 billion Euros, according to a recent report by Statistik Austria.

Bernhard Felderer, who heads the Institute for Advanced Studies (IHS) and the Austrian State Debt Committee, said predictions that Europe was on the brink of another recession were “one step too far” in his opinion. The influential economist said today a “positive surprise” was possible if the situation of the financial markets normalised in the foreseeable future. The Eurozone’s financial and economic stability strongly depends on the condition of Italy, according to Felderer. The IHS chief pointed out that the current European Financial Stability Facility (EFSF) would be too small to provide Italy with enough credits in case of a state bankruptcy.

The IHS said in September that the Austrian economy would increase by 0.8 per cent next year. The institute gave this forecast two months after it said an improvement of 1.8 per cent was within reach for the small European Union (EU) member country. Bank Austria (BA) economist Stefan Bruckbauer warned last month that Austria’s industry could experience a “slight recession” in the next few months because of a potential decrease of assignments. Bruckbauer explained that a “substantial downturn” of Austrian industry in 2012 was not expected despite dire months ahead.

Some Austrian enterprises may experience troubles in the years ahead due to a possible reduction of public subsidies. No other EU state pours more money into the economy and both private and public institutions like Austria. Economists have appealed on the government coalition of Social Democrats (SPÖ) and the conservative People’s Party (ÖVP) to pull the plug. At the same time, the coalition could be forced to reintroduce a subsidisation scheme for firms putting their staff into short-time instead of laying them off. The government saved tens of thousands of jobs by compensating companies for their losses in the crisis years of 2009 and 2010.

Joblessness is expected to increase slightly in Austria in 2012. More than 300,000 people living in the country were out of work last month when the number of unemployed citizens increased by 0.8 per cent compared to October 2010. Around 3.45 million people had work in Austria in October 2011. The country had one of the lowest unemployment rates in Europe in the past two years at between 3.7 per cent and 4.4 per cent.

All federal ministries have to tighten their belts in the coming years if the government wants to achieve its goal of lowering the budget deficit from 74 per cent to just 60 per cent of the GDP by 2020. However, SPÖ Labour Minister Rudolf Hundstorfer recently claimed his department had the capacity to spend an additional 24 million Euros on employment incentives in 2012 to fight a potential rise of joblessness.