Austrian Economy Prepared for EMU. Medium-term Projection for the Austrian Economy until 2002
In 1997–2002, Austrian GDP will grow by 2¾ percent p.a. on average in real terms. Supported by the strong competitive position of Austria's external sector, exports will continue their dynamic growth and the net exports are expected to furnish a positive contribution to GDP. Domestic demand in the projection period will be fuelled by the brisk growth of private consumption (+2 percent p.a. on average in real terms). As a consequence of a similar growth in real disposable income of private households, the household savings ratio will once again move towards its long-term equilibrium value. Gross fixed capital formation up to 2002 will rise at double the pace of 1991–1997, deriving its dynamism from machinery and equipment investment rather than construction investments. As a result of production expansion and measures under the National Action Plan for Employment, additional jobs could be created and unemployment could be slightly lower at the end of the projection period.
Austrian Economy Prepared for EMU. Medium-term Projection for the Austrian Economy Until 2002
A stronger international competitive position and brisk domestic demand will have a positive impact on the Austrian economy in the next years. Assuming that the international financial crisis will be temporary in its detrimental effect and that the public budget consolidation policy will continue, there are no obstacles to the achievement of stable growth. In 1997-2002, GDP will grow by 2.75 percent p.a. on average, which is slightly above the EU average rate. Growth of the Austrian economy has accelerated since 1996. The dynamic development is likely to be temporarily stayed by the effects of turbulences on the international financial markets. After a slight slowdown in 1999, total economic production will once again expand strongly. As a result of production expansion and measures under the National Action Plan for Employment, some 100,000 additional jobs could be created in the projection period. Unemployment should decline by about 1 percentage point (from 7.2 percent to 6.2 percent of the dependently employed in line with the traditional definition; from 4.4 percent to 3.7 percent in accordance with the EU definition). The external sector will make a positive contribution to growth of 0.25 percent of GDP on average. Improved terms of trade and an upswing of the domestic tourism industry will provide for a noticeable reduction of the current account deficit over the next years. In the projection period domestic demand is supported by strong and steadily growing private consumption (+2 percent p.a. in real terms on average). Consumer confidence has improved. As a consequence of the growth of disposable real income of private households, the personal savings ratio will gradually be returned to its long-term equilibrium value. At an average growth of 4 percent p.a., gross fixed capital formation up to 2002 will rise at double the pace of 1991-1997. Plant and equipment expenditure will develop more dynamically, while building investments will grow moderately as a consequence of the redimensioning process in residential housing construction. Neither import prices nor unit labor cost are expected to make for any upward trend of prices domestically, and sustained competitive pressure effectively restricts price increases, so that prices will remain stable. The average rate of inflation will be 1.25 percent p.a. According to the projection (which does not consider the plans for tax reform), budget consolidation will continue in 2000, after a hiatus in 1999. The deficit will be less than 1.5 percent of GDP, government debt, on the other hand, will not decline below 60 percent of GDP.
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