Review and Preview 2019 - Bank Austria
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Focus Austria
UNICREDIT
BANK AUSTRIA
ECONOMICS &
Review and
MARKET ANALYSIS
AUSTRIA
Preview 2019
2018Focus Austria
Economic boom in Austria
International Environment
2016 2017 Rev. 1) 2018 Rev. 1) 2019
Forecast
2017 2018 2019 GDP (real, change in %) 1.5 3.0 2.8 2.0
(GDP, change in %) Inflation (CPI, in %) 0.9 2.1 2.2 1.9
Euro zone 2.5 2.2 1.9 Unemployment rate (in %) 9.1 8.5 7.7 7.6
Germany 2.2 2.0 1.9
1) Revision since last report
France 2.3 1.8 1.6
Italy 1.6 1.3 1.2
Spain 3.1 2.7 2.1
■ Economic growth rose to 3% in 2017 – with higher momentum than in the
UK 1.8 1.2 1.3
eurozone for the first time in three years
USA 2.3 2.7 2.3
With an economic growth of 3% in 2017, the Austrian economy is back in the
Japan 1.7 1.1 1.0
fast lane in a European comparison. The acceleration compared to the weaker
previous years is primarily attributable to the fact that the momentum of do-
2015 2016 2017 mestic demand caught up with the rest of the eurozone and is now even ex-
(annual average) ceeding it slightly. In addition, the strongly export-oriented economy was given
USD per euro 1.11 1.11 1.13 an important growth stimulus by the revival of global trading in 2017.
CHF per euro 1.07 1.09 1.11
GBP per euro 0.73 0.82 0.88 ■ Cyclical peak has passed – pace of growth remains high
JPY per euro 134.3 120.3 126.7 The cyclical peak has passed; sentiment and early indicators have now stabi-
lized at a lower level. The excellent export environment has lost its shine since
Oil (USD/barrel) 53 45 55 the beginning of 2018. Domestic demand is also slowing down. We are assum-
ing an increase in GDP by 2.8% for 2018. As the economic cycle moves towards
10y Gov. bond (A) 0.75 0.37 0.56 its end and global support eases off, this means that we can expect a flattening
3m Euribor -0.02 -0.26 -0.33 of economic growth at a solid 2% for 2019.
■ The labor market benefited from a good economic cycle in 2017 – improve-
Source: UniCredit Research ment trend tapers off slowly in 2018/19
The acceleration of the growth in employment in 2017 to almost 2% compared
to the previous year has facilitated a decline in the unemployment rate for the
first time since 2011. After reaching an average of 9.1% in 2016, the unem-
ployment rate fell to 8.5% in 2017, and according to Eurostat it fell from 6 to
5.5%. In fact, in the first half of 2018, the positive trend continued even more
strongly. The improvement in the situation on the labor market will continue,
supported by the good economy, but at a slower pace. For 2018, we expect an
unemployment rate of 7.7% (or 4.8%) and for 2019 a rate of 7.6% (4.7%).
■ Inflation climbed to 2.1% in 2017 – inflation rate remains at around 2% in
2018/19
After just 0.9% in 2016, the rate of inflation in Austria rose to an annual average
of 2.1% in 2017. The upturn was primarily down to the increase in the crude oil
price. With an average of 1.9% in the first half of 2018, inflation was slightly
lower than in the previous year. However, that trend has now reversed. In June,
the rate of inflation rose to 2% year-on-year. The upward trend will continue in
the months ahead. The combination of higher oil prices and less support due to
the exchange rate will increase inflation to an average of 2.2% in 2018.
Author: Walter Pudschedl
■ Normalization of monetary policy initiated – no interest rate hike expected at
Imprint least until late summer 2019
Published by UniCredit Bank Austria AG
Economics & Market Analysis Austria The higher oil price, but also the economic recovery, which influences wage dy-
Rothschildplatz 1 namics, will ensure an upward trend in inflation in the Eurozone as a whole in
1020 Vienna
Telefon +43 (0)50505-41957 the months ahead. The expected increase in inflation to an average of 1.7% in
Fax +43 (0)50505-41050 2018 will enable the ECB to introduce the normalization of monetary policy.
e-Mail: econresearch.austria@unicreditgroup.at
The ECB will allow the assets purchase program to expire as expected at the
as of August 2018 end of 2018 and has announced that it will only consider changing interest
rates after the end of the summer of 2019
UniCredit Research Page 2Focus Austria
■ Budget targets eased thanks to a good economic cycle – no more new debt
planned from 2019
The budget deficit was reduced significantly to 0.7% of GDP in 2017, supported
by strong economic growth. The draft budget for 2018 provides for a general
government budget deficit of 0.4% of GDP. 2019 is expected to bring a balanced
budget for the first time since the 1970s. The declining trend in public borrow-
ing in relation to the economic output that took effect in 2016 is expected to
continue in the years ahead. For the end of 2019, we expect a decline to 72%
of GDP, also supported by the further asset reductions at the Bad Bank HETA.
The previous peak of almost 85% of GDP was reached in 2015.
■ Banking markets gain in momentum – loans and deposits growing signifi-
cantly
Alongside the economic recovery, the demand for credit increased in Austria in
2017, and also significantly in the first half of 2018. The entire lending volume
increased as an annual average by 2.2%, with corporate loans largely responsi-
ble for the gain in momentum. Despite the generally low interest rates, total
deposits in Austria are increasing sharply and the pace of growth did not fall in
corporate investments or private households in the first half of 2018. The on-
going favorable economic prospects are expected to ensure further increases in
the demand for credit in the second half of 2018 and 2019. On the investment
side, the low interest environment will continue to dominate. The investments
are expected to be focused on very short-term deposits.
The economic situation at a glance
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Real change in %
GDP 1.8 2.9 0.7 0.0 0.8 1.1 1.5 3.0 2.8 2.0
Private consumption 1.0 1.3 0.5 -0.1 0.3 0.5 1.5 1.4 1.8 1.4
Public consumption 0.0 0.1 0.1 0.8 0.8 1.5 2.1 0.9 0.7 0.9
Gross fixed capital formation*) -2.6 6.6 0.9 1.6 -0.7 1.2 3.7 4.9 4.7 3.0
Investments in plant and machinery -3.0 9.8 -0.3 1.7 -1.6 1.5 8.6 8.2 6.3 3.5
Investments in construction -4.4 2.8 1.8 -1.6 -0.1 1.1 1.1 2.6 2.3 2.0
Exports 13.1 5.9 1.4 0.6 3.0 3.1 1.9 5.6 4.0 3.8
Imports 12.0 6.0 0.9 0.7 2.9 3.1 3.1 5.7 3.3 3.6
CPI (change in %) 1.9 3.3 2.4 2.0 1.7 0.9 0.9 2.1 2.2 2.0
HCPI (change in %) 1.7 3.6 2.6 2.1 1.5 0.8 1.0 2.2 2.3 2.0
Current account (in EUR bn) 8.4 5.1 4.7 6.3 8.2 6.6 7.5 7.0 8.5 9.4
Current account (in % of GDP) 3.3 1.6 1.5 1.9 2.5 1.9 2.1 1.9 2.2 2.3
Employment in ´000s**) 3,260 3,323 3,370 3,392 3,416 3,449 3,502 3,573 3,655 3,700
change in % 0.8 1.9 1.4 0.6 0.7 1.0 1.6 2.0 2.3 1.2
Unemployment rate (nat. def.) 6.9 6.7 7.0 7.6 8.4 9.1 9.1 8.5 7.7 7.6
Unemployment rate (EU def.) 4.8 4.6 4.9 5.4 5.6 5.7 6.0 5.5 4.8 4.7
Unemployed (annual average in 1,000) 251 247 261 287 319 354 357 340 314 310
General gov. balance (in % of GDP) -4.4 -2.6 -2.2 -2.0 -2.7 -1.0 -1.6 -0.7 -0.5 0.0
Public-sector debt (in % of GDP) 82.7 82.4 81.9 81.3 84.0 84.6 83.6 78.3 74.7 71.9
Nominal GDP (in euro bn) 296 310 319 324 333 344 353 370 388 403
*) excluding changes in inventory **) excluding persons drawing maternity benefits, military service and training
Source: UniCredit Research
UniCredit Research Page 3Focus Austria
Cyclical peak in Austria passed – challenges increasing
■ Increase in GDP of 3% brings Austria back to the fast lane in Europe in 2017
■ Cyclical peak passed, but growth stabilizing solidly
■ Domestic demand remains the driving force, despite the slight loss of momentum in investment growth
■ Protectionist tendencies in trading and geopolitical tensions result in falling support from foreign demand
■ We expect economic growth of 2.8% for 2018 and a slowing economy with an increase in GDP of 2% for 2019
■ Focus: Are protectionist measures putting a strain on Austria’s economy?
Austria back in the fast lane in 2017
With economic growth of 3%, the Austrian economy is back in the fast lane in a Euro-
Economic growth of 3% in 2017 – pean comparison for the first time since 2017. While the Austrian economy has con-
stronger than in the eurozone for
the first time in three years sistently grown at a rate considerably above average since the introduction of the euro
through to the financial crisis and also immediately afterwards in the phase of the eco-
nomic upturn, the momentum in Austria since the beginning of the economic recovery
after the euro crisis in the middle of 2013 until the end of 2016 has continually been
below the growth trend in the eurozone. This was primarily due to the comparatively
slow development of domestic demand. On average in these three years, domestic de-
mand in the eurozone provided almost one percentage point more growth per year than
in Austria. Nearly two-thirds of this are a consequence of the very weak economic mo-
mentum during these years.
The acceleration of economic growth in 2017 in Austria is mainly attributable to the
Consumption and capital expendi- fact that the momentum of domestic demand caught up with the rest of the eurozone
ture resulted in economic momen-
tum speeding up in Austria and is now even exceeding it slightly. The stimulus from the German tax reform in
2016, in combination with the improvement in the situation on the labour market have
led to a permanent improvement in consumer sentiment, which is reflected in persis-
tently high growth in the consumer segment. Furthermore, the improvement in senti-
ment and strong growth in orders have helped break the investment slump and trig-
gered the investment boom supported by the good liquidity situation and low interest
level. A further important growth stimulus for the strongly export-oriented Austrian
economy in 2017 was the revival of global trading.
AFTER THREE WEAKER YEARS, GROWTH MOMENTUM IN AUSTRIA IS NOW BACK ABOVE THE EUROZONE LEVEL
GDP GDP growth in comparison
(real, yoy in %) (contribution of demand components to GDP change in %)
6
Euro area Austria 3
4 Private
consumption
2 2
Public
0 consumption
1
-2 Investment
-4 0
Net exports
-6 2014 2015 2016 2017
2000 2002 2004 2006 2008 2010 2012 2014 2016 -1
A EA A EA A EA A EA
Source: Statistik Austria, Eurostat, UniCredit Research
UniCredit Research Page 4Focus Austria
Domestic demand as the driving force: Recovery of private consumption continues
With an increase of 1.4% in 2017 compared to the previous year, private consumption
reflected the strong rate of expansion set in motion by the 2016 tax reform, which, after
Private consumption gaining in mo-
mentum since the 2016 tax reform almost four years of virtual stagnation, resulted in an increase of 1.5%. The levelling off
of the positive effects of income tax reform was balanced out on the one hand by the
improvement in consumer sentiment, which is reflected in increased consumer spend-
ing, which was apparent in the reversal of the rising trends in the savings rate, among
other things. The savings rate fell to an all-time low of 6.4% in 2017. On the other
hand, the improvement in the situation on the Austrian labour market driven by the
economic situation, which was reflected in very high employment dynamics of around
2% on a year-on-year basis, provided an ongoing stimulus for private consumption even
without new fiscal stimuli.
We assume that private consumption will again show strong growth momentum in
2018. In the first half of 2018, the tailwind from the high employment dynamics
brought about by the good economic situation was even stronger in fact. The slight ac-
celeration in wage growth also provided further support. After an increase by 1.5% on
Easing on the labour market en- average in 2017, wage rates are showing a clear upward trend with a year-on-year in-
sures ongoing tailwind
crease of more than 2% in the first months of 2018. In addition, we assume that the
savings rate will still show a slightly declining trend in 2018. Driven by the good situa-
tion on the labour market and the above-average sentiment among consumers, de-
mand for durable consumer goods will remain strong. New passenger car registrations
rose more than 3% year-on-year in the first half of 2018. However, comparatively high
inflation continued to limit support for private consumption. In comparison to the aver-
age performance in the eurozone and also in neighbouring Germany, inflation is result-
ing in lower real wage increases, which will somewhat limit the momentum of con-
sumption growth during the year, especially as the high employment dynamics will not
continue on this scale. However, private consumption, which accounts for a share of
around 50% of the total economic output, will remain one of the most important pillars
supporting economic growth with an expected year-on-year increase of 1.8% in 2018.
GOOD SENTIMENT REFLECTED AMONG AUSTRIAN CONSUMERS SINCE THE 2016 TAX REFORM
Consumer sentiment Private consumption
(standardized) (real, yoy in %)
3 2.0
Germany Austria Euro area
2000-2017 average
2 1.5
1 1.0
0 0.5
-1 0.0
-2 -0.5
2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Statistik Austria, Eurostat, UniCredit Research
Investment boom goes into overtime
In addition to consumption, a strong expansion of capital expenditure also provided
High investment dynamics promote
economic growth in Austria for the plenty of support for economic growth. In 2017, the gross fixed capital formation rose
third year in a row by 4.9% year-on-year. Thus the strong investment cycle has now lasted for a third year
in a row after a severe investment slump between 2012 and 2014, despite low interest
rates. From the middle of 2015, the investment backlog began to break and the Aus-
trian business sector began to make deferred replacement investments. Only thereafter
did the investment boom pick up speed due to extension investments.
UniCredit Research Page 5Focus Austria
The investment boom is especially evident in the development of the investments in
equipment, which increased by 8.2% year-on-year in 2017, but this meant that the mo-
mentum from the previous year could not quite be achieved once again. This is due to
the noticeable decline in the growth of capital expenditures in vehicles, which halved to
a still impressive level of 6.2% in 2017. In contrast, capital expenditures in machinery
and equipment posted an increase in momentum in 2017 to 8.9% (2016: 6.7%). After a
Good prospects for the continua- long period of stagnation, construction investments also increased substantially again
tion of the investment boom at a for the first time in 2017. Both in residential buildings and other buildings, there was a
slightly lower tempo
significant upward trend with an average increase of 2.6%.
Due to the length of the investment cycle, the probability of investment growth weak-
ening in 2018 is clear. After the increase of 5.3% in the first half of 2018, the real mo-
mentum for the full year of 4.7% will be nearly as high as in the previous year. Sup-
ported by the low interest rates and high average liquidity, Austrian companies continue
to plan a strong expansion of investment activities for 2018. In particular, the metal in-
dustry, chemical industry and building suppliers are very optimistic about expanding
their production capacities due to strong demand. This is borne out by the currently
high utilisation of local industry, which is around 2 percentage points above the long-
term average.
AT 23.5%, AUSTRIA HAS THE FOURTH HIGHEST INVESTMENT RATIO IN THE EU, AND THE BOOM CONTINUES
Investment ratio in the European Union Gross fixed capital formation
(2017 in %) (real, yoy in %, with contributions of investments in equipment and
buildings)
30 8 6.6
4.9 4.7
6
25 3.7
3.0
4
20 1.6 1.2
0.9
2
15 -0.7
0
10
-2
Equipment
5 -4 -2.6 Buildings
Gross fixed capital formation
0 -6
EL
EE
BE
EA
LV
CZ
HU
EU
SD
RO
SK
ES
DK
FI
BG
UK
SI
AT
FR
MT
HR
NL
LT
PL
IT
PT
CY
LX
IE
DE
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Statistik Austria, Eurostat, UniCredit Research
Global trade fuels Austrian foreign trade
The acceleration of global trading in 2017, supported by the synchronous, increasingly
investment-driven economic upswing in industrialised and emerging markets, has given
demand for Austrian export products a strong boost. The goods exports rose by a nominal
amount of 8.2%, reaching EUR 141.9 billion in 2017. The goods export quota climbed to
Exporting momentum accelerated 38.4% of GDP. Due to strong consumption and investment demand, the Austrian econ-
strongly year-on-year to 8.2% in
2017 omy’s demand for imports even increased by 8.8% to EUR 147.6 billion in 2017.
While trade with the most important partner Germany (share of exports over 30%;
share of imports almost 37%) developed slightly below average, foreign trade with the
countries directly below it on the list – the US, Italy and France – increased. Foreign
trade with the emerging markets in Central Eastern Europe, which take almost 20% of
Austrian exports, also increased at a disproportionate level, supported by the economic
upward trend in the region.
The trade deficit was more than balanced out by a surplus in services, propped up by
tourism, in 2017. A new record of 144.5 million overnight stays contributed to this.
With a surplus of 1.9% of GDP, the current account balance was still slightly below the
value of the year before in 2017.
UniCredit Research Page 6Focus Austria
After a break for a year, foreign trade once again made a positive contribution to the
growth of the Austrian economy in 2017. Around 15% of the GDP increase was down to
net exports. Foreign trade should provide a net contribution to economic growth again in
2018. Due to a more moderate demand for imports in view of the slight slowdown in the
investment momentum, it could even make a somewhat greater contribution than in
2017. The level of growth will remain high in 2018, but will continue to lose more in mo-
mentum over the course of the year. In our opinion, there are three reasons for this.
Firstly, the UniCredit Global Leading Indicator, which combines a number of macroeco-
nomic early indicators from different countries and sectors to form a number, already in-
dicates a slowdown in global trade. Secondly, the headwind due to the stronger euro in
relation to the US-Dollar compared to the previous year will become noticeable. After
around USD 1.13 for EUR 1 on average in 2017, the downward convergence of the US
dollar will continue towards equilibrium. At the end of 2018, the exchange rate of the
euro compared with the US dollar is expected to increase to 1.20, supported by rising
portfolio inflows and the decrease in risk assessment for Europe. Thirdly, the concerns
about possible consequences of the protectionist policy of the USA are increasing, even
though we believe the effects on the Austrian economy will be manageable at the cur-
rent level. However, a vicious circle is impending of reciprocal protectionist measures,
which are likely to have a negative impact on the momentum of global trade. Global eco-
nomic growth is likely to suffer as a result of this, which would not be without a noticea-
ble impact on the growth prospects for Austrian foreign trade.
IN SPITE OF HIGH EXPORTS, THE TRADE DEFICIT ROSE IN 2017, WITH THE CURRENT ACCOUNT SURPLUS LOWER
Export and import volume Current account balance
(monthly values, in EUR mn) (in % of GDP)
13,500 Goods Services
Exports, s.a. 5 Primary income Secunary income 5
13,000 Exports, trend Current account
4 0.3 0.2 4
Imports, s.a.
12,500
Imports, trend 3 0.2 3
12,000 2.2 2.3 2
2 1.9 2.1 1.9
11,500 3.0
1 3.1 1
-0.1 2.8 3.9 4.2
11,000 0.6 0.1
0 -0.3 0
-0.7 -1.0 -1.0 -1.0
10,500 -1 -0.8 -1
-0.9
-1.0 -1.0
10,000 -2 -2
01/15 07/15 01/16 07/16 01/17 07/17 01/18 2015 2016 2017 2018 2019
Source: Statistik Austria, Eurostat, UniCredit Research
The good times are not over – but cyclical peak has passed and risks are on the rise
Export growth burdened by de- The jubilant mood in the domestic economy is continuing in the summer of 2018. The
creasing momentum in global trad- UniCredit Bank Austria economic indicator stands at 3.6 points in July – posting a de-
ing, strength of the euro and con-
cerns about increasing protection- cline for the seventh month in a row from the all-time high at the end of 2017, but is
ism still above average in a long-term comparison.
The cyclical peak has now passed. The excellent Austrian export environment lost its
shine somewhat in the first half of 2018. The indicator for the global industry senti-
Industrial and consumer sentiment ment weighted with the domestic foreign trade shares has clearly fallen. The upward
reach their peak since the financial
crisis, but export environment loses trend in the key markets of Germany and France and in some Eastern European coun-
its shine a little tries in particular has ended. Nevertheless, the domestic industry remains optimistic in
view of the high volume of orders.
UniCredit Research Page 7Focus Austria
ECONOMIC SENTIMENT HAS PASSED ITS PEAK; ECONOMIC GROWTH IS SLOWING DOWN
Sentiment indicators (standardized) GDP
(real change in %, qoq and yoy)
3
Industry 3.5 1.75
International industry 3.0
3.0 2.8 1.50
2 Consumer
Construciton 2.5 1.25
Services 2.0
1 2.0 1.00
1.5
1.5 1.1 0.75
0 1.0 0.50
0.5 0.25
-1 0.0 0.00
-0.5 qoq, s.a. (right-hand scale) annual average -0.25
-2 -1.0 -0.50
01/15 01/16 01/17 01/18 2015 2016 2017 2018 2019
Source: Statistik Austria, Eurostat, UniCredit Research
The optimism of domestic consumers is also high in view of the ongoing improvement
in the situation on the domestic labour market. The economic sentiment in Austria con-
tinuously improved up to the beginning of 2018. However, since spring, the upward
trend has abated and sentiment has become more inconsistent. In the service sector,
sentiment is in fact slightly depressed at this time.
Over the rest of the year, the pace of growth of the Austrian economy is expected to
slow down slightly. Firstly, the economic tailwind generated by foreign demand appears
to be easing off. The effects of the strength of the euro compared with the US dollar as
well as the rising tension over trade policy are expected to become apparent. The inter-
est-rate hike in the USA could have an unfavourable effect on the flow of capital in the
emerging markets and their pace of growth. Secondly, domestic demand is also ex-
pected to lose momentum. Investment dynamics in particular are about to slow down.
Positive outlook for 2018 and 2019
with a somewhat slower pace of The investment boom is already in its fourth year. The backlog that previously existed
growth has therefore now been covered. However, the high degree of utilisation of the domestic
economy reflects a strong momentum in investments in equipment due to capacity ex-
pansion in order to cover the high demand. In contrast, thanks to the strong growth in
employment and more movement in wages, there is still plenty of stimulus from pri-
vate consumption.
Despite this, at 2.8%, economic growth in Austria will still be very strong in 2018 and
will be above the long-term average for the second year in a row. In addition, as in
2017, economic growth will be higher than in the eurozone and will also once again
surpass that in Germany. For 2019, the outlook for the Austrian economy is still favora-
ble, but as the economic cycle moves towards its end and global support eases off –
particularly from the US, where a number of factors are expected to result in a flatten-
ing of economic growth in the year following the tax cut – this is likely to result in the
economy normalizing on a very solid level of growth of around 2%.
UniCredit Research Page 8Focus Austria
Protectionist tendencies and the consequences for Austria
In early March, US President Donald Trump announced the introduction of increases in
import duties on steel and aluminium (25% and 10% respectively). For the Member
States of the European Union, the introduction was postponed until 1 May 2018, but is
US trade policy could exacerbate now in effect. According to US statistics, the US imports affected goods at a value of
economic slowdown around EUR 400 million in 2017 from Austria (steel: EUR 240 million, aluminium: USD
160 million). This affects under 0.3% of total exports in Austria, with a percentage of
GDP of just 0.1%. The direct economic consequences of US levies on steel and alumin-
ium for Austria are therefore manageable.
In the event of a widening of trade policy measures to other products as a response to
the EU’s retaliatory tariffs on some US goods, the potential consequences for the Aus-
trian economy would be significantly higher, however, as a total of about 2.5% the Aus-
trian value added depends on demand from the USA. According to our calculations, a
decline of 10% in Austrian exports to the USA (calculated based on value added) would
lower Austrian GDP by around 0.2 percentage points.
UniCredit Research Page 9Focus Austria
Labor market benefits from the good economy
■ In 2017, the unemployment rate fell to 5.5% – a drop in unemployment in Austria for the first time since 2011
■ Acceleration of the growth in employment in the first half of 2018
■ Improvement on the labor market continues, but pace begins to slacken
■ Unemployment rate to fall to 4.8% in 2018 and 4.7% in 2019
■ Focus: Dynamics of the labor supply continue to shape the Austrian labor market
Labor market benefits from the good economic situation
The economic upturn has now contributed to a striking improvement in the situation
In June 2018, unemployment on the Austrian labor market. After stabilization in 2016, the significant increase in
reached its lowest level since sum-
mer 2013 at 7.8% (national growth in employment in 2017 to almost 2% above the previous year enabled a drop
method) or 4.7% (Eurostat) in the unemployment rate for the first time since 2011. After an average of 9.1% in
2015 and 2016, the unemployment rate dropped to 8.5% in 2017 according to the na-
tional method. The unemployment rate (according to the Eurostat calculation) fell to
5.5% in 2017 (2016: 6.0%).
In the first half of 2018, the positive development on the labor market became even
faster. Employment rose by an average of 2.6% year-on-year. This corresponds to an in-
crease of almost 95,000 employees. Of these new jobs, around 60,000 were on the ser-
vice sector. In relation to the size, a disproportionately high number of new jobs were
created primarily in construction (9,000) and industry (24,000). In addition, the number
of job vacancies increased by almost 15,000 to a total of about 62,000. In the same pe-
riod, the number of jobseekers fell by 37,000. In June, the seasonally adjusted unem-
ployment rate was 7.8% or 4.7% (Eurostat).
STARKER ANSTIEG DER BESCHÄFTIGUNG UND DER OFFENEN STELLEN, ARBEITSLOSIKGEIT GEHT ZURÜCK
Employment and job vacancies The unemployed
Unemployed (change yoy, in 1,000, right-hand scale)
Vacancies (absolute, s.a., right-hand scale)
Unemployment rate (nat. meth. s.a., left-hand scale)
Employment (in 1,000, s.a.)
10 Unemployment rate (Eurostat, s.a., left-hand scale) 100
3,700 80,000
3,650 70,000 8 80
3,600 60,000 6 60
3,550 50,000
4 40
3,500 40,000
2 20
3,450 30,000
3,400 20,000 0 0
3,350 10,000 -2 -20
3,300 0 -4 -40
2015 2016 2017 2018 2018 2017 2016 2015
Source: Statistik Austria, Eurostat, UniCredit Research
Improvement trend on the labor market continues
Given the good economic situation, the improvement in the situation on the Austrian
labor market will continue. However, due to declining economic support in the months
ahead, somewhat lower growth in employment is to be expected. Given the continuing
sharp increase in the number of workers, therefore, the fall in unemployment will slow
down.
UniCredit Research Page 10Focus Austria
For the full year 2018, we are expecting employment growth of just over 2%, with a drop
Further decline in the unemploy- in the annual average unemployment rate to 7.7% (national method) or 4.8% (Euro-
ment rate in 2018/19 – but at a stat). In 2019, the positive trend on the labor market is expected to slow down in view
slower pace of the more moderate pace of growth in the economy. In comparison to 2018, there
will only be a very slight drop in unemployment rates by around one tenth of a percent-
age point.
STRONG INCREASE IN EMPLOYMENT IN CONSTRUCTION AND IN INDUSTRY SUPPORTS THE DROP IN UNEMPLOYMENT
Employment trend by sector Workforce
(in 1,000) (in 1.000) (in %)
70 100 10
Services Construction
60 80 9.1 9.1 8
Industry Primary sector 8.5
50 7.7 7.6
60 6
40 42.6 66
40 55 58 4
30 47.4 51
34.6 42
20 30.1 3.8 20 2
10 17.4
2.5 6.2 5.0 0 0
0 2.1 0.1 -0.2 2.9
1.5
0.2 0.4 Unemployed (change against previous year)
0.3 -0.8
-2.5 -2.4
-2.5 -3.4
-10 -1.5 -20 Employed (change against previous year) -2
Unemployed -9.8 Employeesd
Unemployment rate (in % - right-hand scale)
-20 -40 -4
2015 2016 2017 2015 2016 2017 2015 2016 2017 2018 2019
Source: Statistik Austria, Eurostat, UniCredit Research
Supply of labor: the dominant factor on the domestic labor market
With the start of the full free movement of workers in Austria for employees from Cen-
tral and Eastern European countries acceding to the EU in May 2011 (Hungary, Poland,
Czech Republic, Slovakia, Slovenia and Baltic States) as well as from 2014 (Romania
and Bulgaria), there has been strong labor migration to Austria, which has increased
the supply of labor significantly up to the middle of 2018. The supply of labor in this
Increase in employment by around period rose by 6% or 220,000 people. About 80% of this increase is attributable to for-
50,000 annually needed for the ris- eign employees.
ing supply of labor on the labor
market The increase in the labor supply from an annual average of around 50,000 up to
60,000 persons means that in Austria, employment has to rise at least as much to re-
duce unemployment. This was not the case until 2017 – the first time since the labor
market opened up to employees from the new EU Member States. Due to an increase
of around 70,000 workers, the number of jobseekers fell year-on-year by almost
17,000. In addition to economic development in Austria, therefore, the extent of the
increase in the labor supply is decisive for the development of the unemployment rate
and must therefore be taken into consideration for further assessing the situation on
the labor market.
UniCredit Research Page 11Focus Austria
Inflation in Austria remains at around 2%
■ Rate of inflation climbed to 2.1% in 2017 – primarily caused by the rise in the oil price
■ Slightly lower inflation in the first half of 2018 supported by the strength of the euro
■ Higher oil price, strong domestic demand and more significant wage growth result in expected inflation of 2.2% for 2018
and 2% for 2019.
■ Normalization of monetary policy brings an end to the zero interest rate policy after the summer of 2019
■ Focus: How the exchange rate affects oil price dynamics
Oil price caused increase in inflation in 2017
After 0.9% in 2016, the average rate of inflation in Austria in 2017 rose to 2.1%. The
upturn was primarily down to the increase in the crude oil price from an average of
USD 45.1 in 2016 by more than 20%, reaching USD 54.9 per barrel in 2017. This made
the Transport product division, which includes the fuel prices and which had dampened
inflation in the previous years, one of the biggest price drivers. 19.4% of overall infla-
Oil price-related increase in infla-
tion in 2017 to 2.1% tion, i.e. around 0.4 percentage points, is down to this, while it represents only 12.9%
of the basket of goods (see diagram below). In addition, the stronger demand also
pushed prices up. This is reflected on the one hand in the product group Restaurants
and Hotels, where prices for hosting services rose by almost 3%, and apartments for
rent, which rose by more than 4% year-on-year, although the category Housing and En-
ergy posted a below-average rise in inflation. The only relative and simultaneously ab-
solute price damper category in 2017 was Communications.
With an average of 1.9% in the first half of 2018 compared to the previous year, in-
flation in Austria was slightly lower than in the previous year. The comparatively
Slight fall in inflation in the first lower price increase in crude oil and the weakening of the US dollar against the euro
half of 2018 due to a strong euro, contributed to this. However, that trend has now reversed. In June, inflation rose to 2%
but the trend has reversed
year-on-year. Due to the uncertainty surrounding the termination by the US of the nu-
clear deal with Iran, the oil price is around 20% above the level at the beginning of the
year and even 50% higher than one year ago. In addition the dampening effect of ex-
change rate trends, which has been significant to date, has abated, as the euro has lost
around 5% against the US dollar since the spring.
INFLATION IN 2017 DRIVEN BY TRANSPORT, HOSTING SERVICES AND A PRICE INCREASE FOR LEISURE AND CULTURE
Price drivers in 2017 Factors with a (relative) price dampening effect
Impact on inflation in % 2017 15.2
Tobacco&Alc. 6.2 Housing&Energy
Weight in % 20.0
beverages 3.9
Misc. goods 6.2
12.7 8.7
Recreation&Culture 3.7
11.1 Health 5.5
13.1 Clothing 3.6
Food 5.1
11.5
Furnishing 2.0
Restaurants & 15.2 7.0
Hotels 11.0 Education 1.1
1.2
18.5 Impact on inflation in % Weight in %
Transport Communications -1.3 2.1
12.9
Source: Statistik Austria, Eurostat, UniCredit Research
UniCredit Research Page 12Focus Austria
Stable inflation and normalization of monetary policy in sight
Due to the low price basis in the summer of 2017, the price of oil will provide for a
Inflation in 2018/19 at around 2% moderate increase in inflation from the middle of 2018 beyond the 2% mark year-on-
year-on-year
year, despite the ongoing dampening effect of the euro, which is stronger compared to
the previous year. The annual average inflation for 2018 of 2.2% is expected to be
slightly higher than in the previous year. In 2019, due to ongoing price pressure, espe-
cially for services, we expect inflation in the area of around 2%, especially as the im-
provement in the situation on the labor market is expected to ensure a moderate accel-
eration in wage growth. With an average of 2.3%, the HICP in Austria in 2018 will be
above inflation in the eurozone for the tenth year in succession.
Asset purchase program ends at The higher oil price as well as the economic recovery, which influences wage dynamics,
the turn of the year, movement in
interest rates at the earliest after will ensure an upward trend in inflation in the Eurozone as a whole in the coming months.
summer 2019 The increase in inflation to an average of 1.7% in 2018 will enable the ECB to introduce
the normalization of monetary policy. The ECB will allow the asset purchase program to
expire as expected at the end of 2018 and has announced that it will only consider chang-
ing interest rates after the end of the summer of 2019.
IL PRICE FLUCTUATIONS PRIMARILY AFFECTING INFLATION THROUGH TRANSPORTATION
Oilprice and FX Inflation
120 Oil price/barrel in euro 1.6 (with effects resulting from goods contained in the basket)
Oil price per barrel in USD 3.0% 3.0%
105 USD/1EUR (right-hand scale) 1.5 Transportation Housing
2.5% Food others 2.5%
CPI total
90 1.4 2.0% 2.0%
1.5% 1.5%
75 1.3
1.0% 1.0%
60 1.2 0.5% 0.5%
45 1.1 0.0% 0.0%
-0.5% -0.5%
30 1.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 -1.0% -1.0%
01/15 01/16 01/17 01/18 01/19
Source: Statistik Austria, Eurostat, UniCredit Research
How the price of the euro affects oil price dynamics
The development of the oil price has a noticeable effect on inflation in Austria. The ef-
fect on the development of domestic prices depends not only on the international price
fluctuations from crude oil traded in US dollars, but also on the movements of the USD
against the euro. Depending on the direction and magnitude of these movements, the
effect of the oil price may therefore be exacerbated or attenuated and even completely
cancelled out by changes in exchange rates.
In our current forecast, we anticipate an increase in the oil price of an average of USD
54.9 per barrel in 2017 to USD 73.6 in 2018. This corresponds to an increase of around
34%. At the same time, we expect a price increase in the euro compared with the US
Increase in the price of oil in 2018 dollar from 1.13 to 1.20 on annual average in 2018, i.e. an increase by around 6%. As a
is only partially offset by the result, the oil price measured in euro, will only increase from EUR 48.6 to EUR 61.5, not
stronger euro
quite 27%. The increase in the oil price is absorbed slightly on the global markets by
the rise in the rate of the euro, which means that the effect on inflation is therefore
muted.
To clarify the influence of oil-price or exchange-rate movements on Austrian inflation,
we have calculated alternative scenarios using our short-term inflation model. In the
UniCredit Research Page 13Focus Austria
oil-price scenario, at the end of 2018 we assume an unchanged exchange rate for al-
ternative dollar oil prices of plus or minus 10% compared with our current forecast.
This results in inflation that is 0.03 percentage points higher, or 0.02% lower inflation
than in the base forecast. Given unaltered US dollar oil prices, an increase in the ex-
change rate of the euro by 10% would even result in a somewhat greater fall in infla-
tion by 0.04 percentage points, while a drop in the exchange rate by 10% against the
US dollar would result in inflation that is 0.05 percentage points higher. Due to the
very short time horizon examined (up to the end of 2018), only minor deviations
emerge from the base forecast.
Since the fluctuation in the exchange rate tends to be somewhat more strongly re-
flected than the oil price fluctuations in US dollars, a 10% increase in the oil price in
USD could be more than compensated for according to the model by a 10% strength-
ening of the euro. A synchronous fall in the euro would in fact more than double the ef-
fect on inflation.
UniCredit Research Page 14Focus Austria
Good economic situation eases budget plans
■ Strong economic growth helped the overachievement of budgetary targets in 2017
■ Budget proposal for 2018 provides for deficit reduction to 0.4% of GDP
■ Balanced budget planned for 2019
■ Public debt falls rapidly as a result of more disciplined budgetary policy and asset reduction at Bad banks
■ Focus: The new government sets its sights on the tax and contributions ratio
Lower budget deficit
After the increase in the general government budget deficit to 1.6% of GDP in 2016,
Budget deficit fell to 0.7% of GDP in
2017 due mainly to the revenue shortfall as a result of the tariff reform of payroll and in-
come tax, the budget deficit was reduced significantly in 2017. At 0.7% of GDP, the
deficit was clearly below the original budget target of 1.2% of GDP, supported by the
good economic cycle with economic growth of 3% instead of the original draft
budget’s forecast of 1.5%.
Revenues were significantly above target. The positive trends in taxes and duties paid,
particularly corporation tax and higher contributions to unemployment insurance due
No negative budget balance in 2019 to strong employment growth contributed to this. In contrast, income from value-
for the first time since the 1970s added tax and payroll and income tax was below the official expectations. The ex-
penses in 2017 were above the target specifications due to payments to KA Finanz AG
and the repurchase of afflicted bonds from HETA. In contrast, the expenses for pension
insurance and unemployment insurance were below target.
GOOD ECONOMIC SITUATION ENSURES STRONG REVENUE GROWTH OF OVER 4% IN THE FIRST HALF OF 2018
Tax receipts Tax and contributions ratio in comparison
(Average monthly revenue, 2010=100) (2016, in % of GDP)
180 50
170
160 40
150
140 30
130
120 20
110
10
100
Taxes (total) Income tax
90 0
Corporate tax Value added tax
HR
EL
LX
BE
DE
EE
LV
IE
DK
HU
RM
UK
CZ
ES
SK
FR
FI
SI
BG
CP
SW
AT
IT
NL
PT
PL
MT
LT
80
EU
Euro
01/15 01/16 01/17 01/18
Source: Statistik Austria, Eurostat, UniCredit Research
No new debt planned for 2019, total public debt declining significantly
After the late election date, the budget for 2018 was decided simultaneously with the
estimate for 2019 at the end of April 2018. The current draft provides for a budget def-
icit of 0.4% of GDP for 2018 and a balanced budget for 2019. The draft of the budget
No negative budget balance in 2019 contains no significant structural changes. In the areas of education, research and se-
for the first time since the 1970s curity, financial priorities are being set, while moderate cuts are planned for expenses
incurred in connection with labor market and integration policy. For 2020,- an income
tax reform was announced for 2020, which is intended to reduce the tax and contribu-
tion ratio to 40% of GDP. In view of the positive economic trend and the low interest
rates, the planned budgetary targets should be within range. In the first half of the
year, the payments in increased by more than 4% compared with the previous year
and are therefore better than expected.
UniCredit Research Page 15Focus Austria
This is due to growth in income and payroll tax and corporation tax. In addition, the
expenses fell by more than 2% year-on-year, resulting in a net borrowing requirement
of EUR 2.8 billion, which is almost EUR 2.5 billion less than in the previous year.
Total public debt fell to 78.4% of GDP in 2017 and is therefore below the 80% mark
for the first time since 2008. Due to the low new debt in 2018 and the balanced
budget for 2019, supported by the further asset reduction at the Bad Bank HETA, a fur-
ther decline in public debt is expected in relation to the economic output in the fore-
cast period. We expect a reduction to 72% by the end of 2019.
DISCIPLINED BUDGET POLICY SUPPORTS DECLINE IN PUBLIC DEBT IN RELATION TO GDP
Budget deficit Public debt
(in % of GDP) (in % of GDP)
2.0 1.6 100
84.6 83.6
90 78.3
1.5 74.7 71.9
1.0 80
1.0 0.7 70
0.5 60
0.5 50
0.0
40
0.0 30
Social security funds Communities (incl. Vienna)
Social security funds Communities (incl. Vienna) 20
-0.5 Federal states Central state
Federal states Central state 10
total total
-1.0 0
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Source: Statistik Austria, Eurostat, UniCredit Research
The new government sets its sights on the tax and contributions ratio
The government program has explicitly set the target of reducing the tax and contri-
butions ratio (taxes and social security contributions in relation to economic output)
Austrian tax and contributions ratio to 40% of GDP. After over 43% in 2015, the ratio fell to 42.7% as a result of the tax
has fallen since 2015 reform in 2016 and continued to fall to 41.9% in 2017. Nevertheless, in an interna-
tional comparison Austria has a far above-average tax and contributions ratio, which
is stated in the government program as an argument for a further reduction.
However, in our view, the amount of the tax and contributions ratio itself is not enough
to be the sole argument for a reduction. This is the case on the one hand as wealthy
countries also tend to have high tax and contributions ratios. Ultimately, only econom-
ically successful countries can undertake comprehensive government activities, for ex-
ample in terms of legal, security or social policy, for its citizens. On the other hand, a
reduction in the tax and contributions ratio does not automatically mean a more effi-
cient state that can generate higher economic growth. Instead, a change of the structure
of the tax and duties burden is key here.
Further reduction requires intelli-
gent tax and social security contri- With the reduction in unemployment insurance contributions for low-earners as of 1
bution adjustments, otherwise July 2018 and especially the income tax reform planned for 2020 by lowering taxes
there is a risk of government cut-
backs on labor, the government is not only planning to reduce the tax and contributions ra-
tio further, but also to have a positive influence generally on economic growth. How-
ever, government services for citizens will only not be reduced, if it is actually possible
to compensate for the revenue shortfall by structural changes and measures that in-
crease efficiency at the same amount.
UniCredit Research Page 16Focus Austria
Banking market gaining momentum
■ Demand for credit benefits from a good economic situation with 2.2 percent increase on average in 2017 and further in-
creasing momentum in the first half of 2018
■ Acceleration in corporate credit growth and strong increase in housing loans
■ Despite a low interest environment: strong deposit growth in 2017 and in the first half of 2018 of around 4% on average
for the year, primarily driven by an increase in momentum among corporate customers
■ Focus: A nation of savers, despite negative real interest rates
Upward trend in loans and deposits
Alongside the economic recovery, credit demand in Austria increased significantly in
2017. The entire credit volume rose by 2.2% on average for the year and reached
2.2% increase in demand for credit over EUR 341 billion or 92.3% of GDP by the end of 2017. A significant contribution
in 2017 with increasing momentum was made by the positive development in corporate loans, which rose 2.9% on aver-
over the course of the year age, with growth as high as 4.9% at the end of the year. The amount of loans for con-
sumer spending and SMEs also began to rise in 2018 even though they stagnated in
terms of the annual average. The demand for housing loans remained strong, but the
growth of under five percent was relatively moderate compared to previous years. De-
spite the increasing momentum in corporate loans, a large part of the investment
boom is not financed by bank loans, but rather by internal financing and other forms.
High liquidity of companies leads to The high liquidity of Austrian companies is reflected in the strong deposit growth of
strong deposit growth. more than 8% for company deposits. Private households also continued to expand
their bank deposits in 2017 and they remained the most important investment class
Despite a low interest environment, by far, even if the volume of new business decreased somewhat compared to 2016.
even private households are build- The second most important investment class continued to be funds in 2017, while
ing up their bank deposits bonds and life insurance again went into a new net decline. Furthermore, another in-
significant factor in the assessment of private households in Austria is direct share eq-
uities.
In the course of the first half of the year, credit demand in Austria increased slightly
Credit demand continued to gain again, with corporate loans making the greatest contribution to the rising momen-
momentum in the first half of 2018
tum. The construction and real estate sectors are de facto solely responsible for the
growth in corporate credit. The demand for credit by other sectors in the Austrian
economy showed only little growth due to the very good liquidity situation and the in-
creasing significance of alternative financing in light of the excess liquidity of the cor-
porate sector. Following the structure of the Austrian economy, some of the financing
came from abroad in the form of intra-Group financing, but also from trade credits.
Housing loans continued to develop dynamically, but the growth rates barely in-
creased any further over the course of the first half of the year. After years of declining
volumes, the financing of consumer spending and SMEs is slightly increasing for the
first time in 2018.
Despite the generally low interest rates, total deposits in Austria are increasing
sharply and the pace of growth did not fall in corporate investments or private house-
holds in the first half of 2018. Short-term deposits are dominant given the low inter-
est rate environment. The demand for funds remained high in the first half of 2018,
while the attractiveness of life insurance continues to decline.
UniCredit Research Page 17Focus Austria
ECONOMIC UPSWING SENDS CREDIT AND DEPOSIT GROWTH IN AUSTRIA SOARING
Corporate lending banks Deposits
(yoy growth adjusted for loan sales and notional cash pooling,) (yoy change in %)
Corporates Households total
10% 12
Corporates Consumption
8% Housing 10
6% 8
4%
6
2%
4
0%
2
-2%
-4% 0
-6% -2
01/15 01/16 01/17 01/18 01/15 01/16 01/17 01/18
Source: OeNB, UniCredit Research
Sustained favorable economic outlook in the second half of 2018 and 2019 en-
sure continuing good demand for credit
Good economic prospects and favourable Despite the solid liquidity situation and financing alternatives on the capital mar-
financing conditions justify further in-
creases in the demand for credit ket, corporate loans will increase slightly. We assume that the demand for financ-
ing for SMEs will accelerate in the months ahead. In addition, optimistic consumer
sentiment is expected to increase the demand for consumer financing slightly once
again. Credit growth in housing finance, which is made possible by the continuing
Fixed interest rates gain in significance at low interest rates, the strong demand for housing and at least slightly rising real
historically low level estate prices, should remain buoyant. The trend towards fixed interest rates hedg-
ing the historically low interest rates, which was on average around 1.8 percent for
new housing loans in the middle of 2018, is likely to continue. The proportion of
fixed interest rate loans in the new loans as a whole is now around 60% in Austria.
In 2015 that figure was only 15%.
Majority of new investments with a short- On the investment side, the low interest environment in private households will
term nature
continue to dominate. Investments will probably continue to focus on very short-
term deposits, which are expected to be the subject of the majority of new invest-
ments, since deposits with longer fixed terms as well as bonds do not offer attrac-
tive yields. We expect additional demand for investments in funds.
AUSTRIAN HOUSEHOLDS PREFER SAVING DEPOSITS DESPITE REAL LOSSES
Real interest rate in Austria Return for deposits since 2007
(in %, nominal interest rate in new business or return (annually, real, households)
from gov. bonds minus CPI in 12 months excl. tax)
Change against previous year in %
6 savings deposits (overnight) 47% Share of financial assets in %
4% 60%
5
4 savings deposits with agreed maturity up to 2 3% 26% 24% 40%
3 years 2% 7%
4% 5% 20%
2 average gov. bond yield (10 years) 1%
1 0%
0%
0 total, -0.3% -20%
-1%
-1 -40%
-2%
-2
-3 -3% -60%
-4
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: OENB, UniCredit Research
UniCredit Research Page 18Focus Austria
A nation of savers, despite negative real interest rates
Austrian households prefer a very conservative investment of their financial assets. Of
the more than EUR 500 billion1) (approx. 137.1% of GDP), 47% are held as savings de-
posits, more than half of which are in fact overnight money assets. In 2017, just over
EUR 120 billion – around 24% of financial assets – was invested in securities. More than
half of this was invested in funds. The proportion of bonds was 27%, while equities ac-
counted for just over 20%.
Nor has the attractiveness of savings deposits for Austrian households subsided in 2018
either. In the first few months of the year, investments in deposits rose by an average of
just under 4% year-on-year. In view of the years of low interest rates, investments in de-
posits have particularly low returns. While the annual return of savings deposits was still
nominally over 2 percent between 2007 and 2011, this figure fell from 2012 to an aver-
age of 0.7 percent. Taking inflation into account, as well as the capital gains tax of 25%,
however, in both cases this means a negative real return of 0.7 or even 1.2%. For the en-
tire period from 2007 to 2017, this resulted in negative real returns of 1.0% (see page
18, graph on the right).
In comparison, an investment in securities in this period produced real income growth of
1.2% per annum. The investment in equities was particularly profitable with a real in-
crease of 3.3% on average, given a particularly favourable performance from 2012 on-
wards.
1) Financial assets without other proportional values and other receivables.
UniCredit Research Page 19Focus Austria
Austria at a glance
Structural indicators 2017 GDP by sectors 2017
Area (in km²) 83,879
Population (in mn) 8.8 Primary sector
President Dr. Alexander van der Bellen 1.3%
Chancellor Sebastian Kurz
Industry
Rating (Moody´s/S&P/Fitch) Aa1/AA+/AA+ 21.9%
Economic performance Construction
Gross domestic product (in EUR bn) 370 6.2%
GDP per capita (in EUR) 42,025
Services
GDP per employee (in EUR) 85,840 70.6%
GDP per capita (in % of EU27 average, PPS) 144.3
Gross domestic product (real change against previous year in %) 3.0 1.3 (Ø 2013-2017)
Workforce (in 1,000) 3,995
Employed (in 1,000) 3,655 3,553 (Ø 2013-2017) Export markets 2017
Employment rate (in %) 41.6
Number of unemployed (in 1,000) 340 332 (Ø 2013-2017)
Vacancy rate (in %) 1.4
others
Monthly average income (gross, in EUR) 3,521 19.2%
Germany
International competitiveness Ranking Trend 30.1%
IMD-World Competitiveness Index 18
IMD Economic Performance 17 other EU
IMD Government Efficiency 32 27.5%
France
IMD Business Efficiency 14 US 5.0%
6.8%
IMD Infrastructure 14
Switzerland Italy
WEF Global Competitiveness Index 18 4.9% 6.4%
WEF Inclusive Development Index 10
Transparancy International Corruption Perceptions Index 16
European Innovation Scoreboard 9
Import markets 2017
Research&Development Ratio (R&D-expenses in % of GDP) 3.2
Investment ratio (Investments in % of GDP) 23.5
others
Tax and levies ratio (Tax and levies in % of GDP) 42.5 18.6%
Merchandise exports (in EUR bn) 123.2 2.8% (Ø 2013-2017)
Export ratio (in % of GDP) 38.4 38.2 (Ø 2013-2017) Germany
Merchandise imports (in EUR bn) 117.6 2.3% (Ø 2013-2017) other EU 36.8%
23.3%
Import ratio (in % of GDP) 39.9 39.3 (Ø 2013-2017)
Foreign direct investment (outward, in EUR bn, 2017) 12.0 6.4 (Ø 2013-2017)
Switzerland
Foreign dircet investment (outward, in % of GDP, 2017) 3.3 5.2%
Italy
6.1%
Foreign direct investment (inward, in EUR bn, 2017) 9.2 3.1 (Ø 2013-2017) Czech Rep. China
4.3% 5.8%
Foreign direct investment (inward, in % of GDP, 2017) 2.5
GDP GDP
Area (Ø 2013- GDP/capita Unemploy-
(real, yoy (in % of
(in km²) 2017) (in EUR) ment rate in %
in %) Austria)
Federal states 2017
Burgenland 3,962 3.3 1.6 29,286 2.3 8.6
Carinthia 9,538 3.0 0.8 35,908 5.4 10.2
Lower Austria 19,186 2.9 1.0 34,426 15.5 8.7
Upper Austria 11,980 3.6 1.3 42,913 17.1 5.8
Salzburg 7,156 2.6 1.3 50,440 7.5 7.3
Styria 16,401 3.7 0.6 37,647 12.6 5.3
Tyrol 12,640 3.5 1.8 45,604 9.2 5.8
Vorarlberg 2,601 3.0 2.4 46,263 4.9 5.8
Vienna 415 2.6 1.3 49,983 25.4 13.0
Source: Statistik Austria, OeNB, IMD, TI, WEF, EU Commission, UniCredit Research
UniCredit Research Page 20Disclaimer and Imprint We invite you to visit the economic analyses on Bank Austria’s website: www.bankaustria.at under "Direct access – Markets & Research - Analyses & Research" in the section "Economic Research Austria" or directly at http://www.bankaustria.at/en/about-us-publications- economic-research-austria.jsp . If you would like to receive information on our most recent publications by e-mail, please subscribe to the newsletter Bank Austria EconomicNews on the website. If you have further questions, please send us an e-mail to econresearch.austria@unicreditgroup.at IHS Markit (Nasdaq. INFO) is a world leader in critical information, analytics and expertise to forge solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to custom- ers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markt has more than 50,000 key business and government customers, including 85 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth. Disclaimer of liability: This publication is neither a marketing communication nor a financial analysis. It contains information on general economic data. De- spite careful research and the use of reliable sources, we cannot assume any responsibility for the completeness, correctness, up-to- dateness and accuracy of information contained in this publication. The opinions of the authors do not necessarily reflect those of Bank Austria and those of the companies which have engaged the ser- vices of the authors. The information contained in this publication is not to be interpreted as an offer or invitation for the sale or pur- chase of securities of any kind. We reserve the right to modify the views expressed in this publication at any time without prior notifi- cation. This information should not be interpreted as a recommendation to buy or sell financial instruments, or as a solicitation of an offer to buy or sell financial instruments. This publication serves information purposes only and does not replace specific advice taking into account the investor’s individual personal circumstances (e.g. risk tolerance, knowledge and experience, investment objectives and financial circumstances). Past performance is not a guide to future performance. The information in this publication contains assessments of short-term market developments. We have obtained value data and other information from sources which we deem reliable. Our information and assessments may change without notice." Imprint Disclosure according to Sections 24 and 25 of the Austrian Media Act (Mediengesetz - MedienG): Published by: UniCredit Bank Austria AG 1020 Vienna, Rothschildplatz 1, which is also the media owner. Business objective: credit institution pursuant to Section 1 (1) of the Austrian Banking Act (Bankwesengesetz) Persons authorised to act on behalf of the media owner (Management Board): Robert Zadrazil (Chairman of the Management Board), Romeo Collina (Deputy Chairman of the Management Board), Dieter Hengl, Gregor Hofstätter-Pobst, Jürgen Kullnigg, Doris Tomanek. Supervisory Board of the media owner: Erich Hampel (Vorsitzender des Aufsichtsrates), Ranieri De Marchis (stellvertretender Vorsitzender des Aufsichtsrates), Livia Aliberti Amidani, Christine Buchinger, Adolf Lehner, Gianni Franco Papa, Mario Pramendorfer, Eveline Steinberger-Kern, Ernst Theimer, Andrea Umberto Varese, Karin Wisak-Gradinger. Interests held in the media owner pursuant to Section 25 of the Austrian Media Act: UniCredit S.p.A. holds 99.996% of the shares in the media owner (key details of the shareholder structure of UniCredit S.p.A. are availa- ble at https://www.unicreditgroup.eu/en/governance/shareholder-structure.html). “Betriebsratsfonds des Betriebsrats der Angestellten der UniCredit Bank Austria AG, Region Wien” (the Employees’ Council Fund of the Employees’ Council of employees of UniCredit Bank Austria AG in the Vienna area) and “Privatstiftung zur Verwaltung von An- teilsrechten” (a private foundation under Austrian law; founder: Anteilsverwaltung-Zentralsparkasse; beneficiary: WWTF – Wiener Wis- senschafts-, Forschungs- und Technologiefonds) have a combined interest of 0.004% in the media owner. UniCredit Research Page 21
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