Challenges Ahead for Austria's Competitiveness and Economic Outlook

Austria's competitiveness will suffer

Increased costs are having a negative impact on competitiveness, not only in services but also in the manufacturing sector. Most Austrian exports are machines and vehicles, followed by processed goods and chemical products. While the competitive outlook for vehicles has improved recently, the results of DG ECFIN's industry survey in both the energy-intensive chemical products sector and the machinery sector point to a loss of competitiveness, both in relation to countries within and outside the EU.

Until the green transformation has comprehensively arrived in Austrian industry, no growth miracles are to be expected for Austrian industry or foreign trade. Consequently, the overall economic outlook is far from rosy. We expect economic growth in Austria to be significantly below potential both this year and next. Accordingly, the government debt ratio, which stood at 78.4% at the end of 2022, is likely to decline only slowly. After all, despite the frequent calls for a return to budget discipline, there has been no talk so far of either tax increases or significant spending cuts.

Overall, the outlook for the Austrian economy is clearly clouded and persistently high inflation will be an additional burden this year and next.