Export-led Economic Growth. Austria's Economy in 1997
The world-wide economic upswing and the improvement in the competitive position of Austria's economy in 1997 resulted in an export boom, which also stimulated investment activity. Domestic demand remained sluggish, however, in the wake of the government's stern consolidation drive. Inflation was dampened by the weakness in consumer demand and the effects of Austria's entry into the EU; unemployment continued its upward trend despite the increase in employment. In 1997, Austria enjoyed a strong, non-inflationary expansion. Economic growth accelerated to 2.5 percent (after 1.6 percent in 1996), attaining the medium-term growth trend. The pick-up in economic activity was mainly driven by the favorable performance of the export sector. Strong growth in Austria's export markets, as well as the improvement in the economy's price-determined competitive position, triggered an export boom. Lively export demand boosted manufacturing output (4.6 percent) and stimulated spending on capital goods. Owing to various special factors such as clement weather in the winter season and the dissolution of rental reserves, the construction industry also recorded output gains; private and public consumption barely exceeded the level of 1996, however. Domestic demand was depressed by the public sector's austerity policies, but the effect of the near-stagnation in disposable income was muted by a hefty decline in the saving ratio and a rise in profits in the wake of the export boom. The financial deficit of the general government declined to 2.5 percent of GDP in 1997. Thus, Austria easily met the fiscal criteria for membership in the Economic and Monetary Union. The deficit in the current account stabilized at a level of about ATS 47.7 billion (or 1.9 percent of GDP). The deficit poses no serious threat because it is related to net payments to the EU and deficits in the transfer balance rather than being the result of a deterioration in the international competitive position. The pick-up in economic activity had positive effects on the performance of the labor market. Dependent employment (excluding persons in military service and on parental leave) rose by 12,800 in 1997, with most of the gains, however, stemming from part-time work. For the manufacturing sector, a more sanguine development can be reported: the long-term decline in the number of jobs finally came to a halt at the end of 1997. Price stability was maintained despite the economic upswing. With a rate of 1.3 percent, inflation reached a record low in 1997. The price-dampening effects of Austria's membership in the EU were increasingly recorded in service prices; moreover, the ample supply in housing lowered rental prices for newly rented apartments. In an international comparison, the performance of the Austrian economy is quite impressive: in 1997, economic growth was as high as in the EU on average, but by ¼ percentage point higher than in Germany. Even during the period 1990-1997, economic growth in Austria kept up with that in the EU; this suggests that Austria's economy coped well with the financial turbulence of the 1990s, the opening of the East and accession to the EU. The rates of inflation and of unemployment are relatively low. On the downside, however, the sluggish structural adjustment as well as the stubborn budget and current account deficits must be noted.
Exportgetragenes Wirtschaftswachstum. Österreichs Wirtschaft im Jahr 1997; Export-led Economic Growth. Austria's Economy in 1997
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