Slowdown in World Economy Dampens Economic Activity in Austria
With a growth rate of 3.3 percent, Austria's economy performed well in 1998. The driving force of the economic upswing in the first half of the year was the boom in exports; in the early fall, however, export growth weakened considerably as a result of the international financial crisis. Even though consumer spending picked up markedly in the course of the year, the rise in domestic demand proved insufficient to offset the shortfall in foreign demand, and economic activity slowed down in the second half of 1998. The plunge in prices of raw materials and of crude oil resulted in a further moderation of inflation. The favourable performance of Austria's economy is also reflected in a robust expansion of employment, which unfortunately did not match the rise in labour supply; thus, unemployment continued on its upward trend. Economic activity in the first half of the year was determined by the lively demand from abroad. Exports, growing at two-digit rates, boosted industrial output. Capital spending also expanded rapidly; investment in construction benefited from the mild weather in the first quarter of the year and from a boom in the renovation and modernisation business. The economic upturn which began in 1997 came to a standstill in the second half of 1998, as foreign demand dropped off sharply under the impact of the financial and currency crises. Still, the balance in the current account improved in 1998, thanks to the good performance of Austria's tourism sector. Foreign exchange receipts from international travel rose by ATS 8 billion. Consumer spending, though firming up in the course of the year, remained subdued, only partly offsetting the impact of the export deceleration on GDP. The slight recovery in consumer expenditures was supported by the rise in disposable income – the first after two meagre years – and an exceptionally low rate of inflation. With the goal of meeting the Maastricht criteria, fiscal policy had reduced the public deficit from 3.7 percent of GDP in 1996 to 1.9 percent in 1997. This stance was not maintained in 1998. Despite the pick-up in economic activity, the general government deficit reached 2.1 percent of GDP. The economic upturn had a positive impact on labour demand. Dependent employment (excluding persons in military service and on parental leave) rose by 29,800 persons. A large part of this gain is due to the expansion of part-time employment in the service sector. The rise in employment did not yet match the increase in the labour supply, and unemployment rose slightly. With a rate of 0.9 percent, the rise in consumer prices hit a record low since 1955. While the inflation slowdown in 1997 was mainly due to the lagged effects of Austria's accession to the EU, the price stabilisation in 1998 can be attributed to the plunge in prices of raw materials as well as to the liberalisation of some service sectors (electricity, telecommunication). With a growth rate of 3.3 percent, Austria's economy is in the top group of EU countries. Real GDP expanded about ½ percentage point faster than in the EU on average; Austria's economy also grew faster than Germany's, where the construction and tourism sector fared considerably worse.
Wachstumsabschwächung in Österreich seit dem Sommer 1998; Slowdown in World Economy Dampens Economic Activity in Austria
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