It will take another two years until the Austrian economy grows by two per cent, a Viennese institute has warned.
The Institute for Economic Research’s (WIFO) five-year forecast – which was presented yesterday (Mon) – shows that the Austrian economy could grow by two per cent from 2013 to 2014. WIFO research reveals that the gross domestic product (GDP) is unlikely to improve by more than 0.4 per cent from 2011 to this year. It could grow by 1.6 per cent from the current year to 2013, WIFO experts said yesterday.
WIFO stressed that its most recent findings highlight the domestic economy’s struggle to achieve pre-crisis growth rates. Long-term investigations show that the Austrian economy grew by 2.2 per cent a year on average between 2006 and 2011. Figures for 2009 show that the Austrian economy was unable to fully protect itself from harmful effects of the global stock market turmoil since the GDP declined by 3.9 per cent in that year before it jumped by two per cent in 2010.
WIFO analysts said yesterday that Austria’s economic prosperity would continue to strongly depend on exports. The institute assumes that their value might rise by 5.5 per cent a year in the next five years. WIFO concluded that such developments may encourage Austrian businesspeople to invest in their facilities.
The Viennese economic research group’s predictions come shortly after the World Bank warned that the Eurozone would plunge into recession this year. World Bank President Robert Zoellick said last week that the 17 European Union (EU) members’ average GDP would decline by 1.1 per cent in 2012 compared to the year before. Zoellick added that World Bank analysts expected the Eurozone’s economy to regain strength in 2013 when its GDP might leap by 1.1 per cent.
Zoellick also announced that World Bank research showed that the global economy would rise by 2.5 per cent this year before a growth rate of 3.1 per cent could be achieved in the following year. Zoellick also warned that the global economy could collapse if the crisis in Europe worsened further.
Austria was one of nine Eurozone countries which were downgraded by Standard & Poor’s (S&P) earlier this month. The American rating agency lowered Austria’s rating by one grade from the best possible estimation of AAA to AA+. S&P argued that Austria’s economy would struggle due to the country’s rising debts.
The rating agency also expressed concerns considering Austria’s strong economic ties with cash-strapped Italy. S&P identified Hungary as another danger zone for the Austrian economy. Firms based in the alpine country currently manage 2,000 branches in the Eastern European (EE) state which joined the EU in 2004 but is not part of the Eurozone.
S&P warned that Austria would not have sufficient assets to save its banks from ruin in the case of a Hungarian bankruptcy. Austrian banks are among the leading investors in the EE region. Austrian National Bank (OeNB) boss Ewald Nowotny criticised S&P and called the rating agency’s verdict “politically motivated”.
Austria’s government coalition of Social Democrats (SPÖ) and the conservative People’s Party (ÖVP) was not pleased to hear of the downgrading either. SPÖ Chancellor Werner Faymann and ÖVP Vice Chancellor Michael Spindelegger promised to continue trying to restore the budget. Discussions about details of the coalition’s austerity package are continuing.