Austria’s economy passed the low point of the current business cycle in the second half of 2019. According to the Oesterreichische Nationalbank (OeNB), there is a “very subdued” economic recovery in the first half of 2020. It expects real GDP growth of 0.3 percent in each case in the first and second quarters compared to the previous quarter.
Compared to the last forecast in November, growth expectations for the first quarter were raised by 0.1 percentage points. This means that real GDP growth in the first and second quarters will be on average 0.1 percentage points higher than in the second half of 2019. However, growth rates in the first half of the year remain below the long-term average of 0.4 percent.
The risks for the current forecast mainly concern external factors such as global trade conflicts and the consequences of the coronavirus epidemic, according to the OeNB’s economic indicator published in February.
The individual economic sectors in Austria continue to develop differently: While industry is weakening, construction and services are much more dynamic. Domestic demand supports the economy.
Industrial added value has been falling since the second quarter of 2019 due to the difficult external environment. According to preliminary data, industrial production in December 2019 was 5 percent below the previous year’s value.
Companies are reluctant to invest, but incoming orders and production expectations signal that bottoming has been achieved by the turn of the year and industrial production will return to growth in the first half of the year. Significant macroeconomic growth impulses will not come from industry in the first two quarters of 2020.
In contrast, residential construction and the service sector are significantly less determined by global economic developments and are developing much more dynamically thanks to intact domestic demand. “In the first half of 2020, domestic demand will remain the mainstay of the Austrian economy due to rising household incomes,” predicts the OeNB.
In addition to the still strong growth in employment and real wages, fiscal stimulus also contributes to this. Family Bonus Plus and the measures adopted by the National Council in July and September 2019 will also support household income in 2020. The current boom in the housing sector is due to high demand for housing, rising property prices and persistently favorable financing conditions.
The economy could also develop weaker. In addition to the global trade conflicts and prolonged weak growth in Germany, its most important trading partner, the consequences of the coronavirus epidemic represent a new risk that is still difficult to assess, explains the OeNB. If the epidemic in China does not weaken as of March, as forecast, growth in Austria in the first half of the year could be 0.1 percentage points lower due to interruptions in the global trade and value chains. (Apa / red)
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