Economic studies
Austria

Austria

Population 8.5 million
GDP per capita 51,433 US$
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Country risk assessment
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Synthesis

major macro economic indicators

  2013 2014 2015  2016(f)
GDP growth (%) 0.3 0.4 0.9 1.4
Inflation (yearly average) (%) 2.1 1.5 0.9 1.9
Budget balance (% GDP) -1.3 -2.7 -1.8 -0.8
Current account balance (% GDP) 2.1 2.1 2.9 2.2
Public debt (% GDP) 80.8 84.2 86.0 87.0

 

(f) Forecast

STRENGTHS

  • Central position in Europe and attractive standard of living
  • Industrial and tertiary sector diversification
  • Non-price competitiveness thanks to family companies and niche products
  • Low household and corporate debt
  • High rate of employment and low youth unemployment (role of apprenticeships and 'flexicurity')
  • 30% of energy consumed is renewable
  • Tourism assets

WEAKNESSES

  • Dependence on German and central/eastern European economic cycles
  • Banking sector very exposed to countries of central, eastern and south-eastern Europe
  • Lack of risk capital and insufficient R&D
  • Multiple levels of government and administration (Federal State, Länder, municipalities)
  • Low employment rate of older people with effective retirement age under 60
  • Low demographic growth with insufficient birth rate

Risk assessment

Confirmation of the recovery in 2016

While growth is expected to be modest, it will be twice as fast as in 2015. Its main driver will be mostly private consumption and investment. Income tax reform implemented in January 2016 will allow Austrians to save up to 5 billion euro (a relief of around 1000€ per worker or retired), thus consumption will strongly increase in the coming months if individuals do not save their extra income. The increase in other taxes intended to finance this reform is expected to have a weak recessive effect. Besides, refugees and their integration will also give a boost to the domestic demand and in fine to growth. Investment, which has become positive in 2015, is likely to increase slightly again even though this forecast is based on uncertain climate linked to presidential election in December, moderate growth of the euro zone following the Brexit announcement and, eventually, challenges faced by the Austrian banking sector. Public expenditures will continue to increase due to the ongoing banking sector restructuring, although it is evolving along the right path. Exports of industrial equipment, construction machinery, automotive parts and vehicles (these three sectors alone making up 40% of the total), chemicals and agro-food products, but also tourism, IT and financial services are expected to benefit from more robust demand on European markets and from the weak euro, which will offset the sluggishness on distant emerging markets. However, with imports increasing in line with domestic demand, trade's contribution to growth is likely to be zero.

 

Fiscal consolidation pending

Fiscal policy will be neutral in 2016. The reform of income tax involving the creation of three new tax brackets and the cut in the rate on low incomes will cost the equivalent of a bit more than 1% of GDP. The presence of refugees will result in estimated additional spending between 0.1 and 0.2%. This is expected to be offset by the fight against tax evasion, an increase in the median VAT rate from 10 to 13% on entertainment, hotels… and in the tax on capital income from 25 to 27.5%. The objective of achieving structural budgetary equilibrium (i.e. excluding cyclical effects) from 2016 set out in the 2012 fiscal package is in jeopardy, as the expected deficit will nearly reach 1%. However, from 2017, the country will be obliged under its European commitments to make an effort representing annually 1.25% of GDP aimed at bringing its debt down to the 60% threshold over twenty years. Savings on pensions and health insurance (gradual raising of the retirement age, tougher eligibility criteria for incapacity benefits) will be limited. The involvement of the Länder and the many municipalities (1/3 of public spending) could disappoint, given that they draw most of their resources from federal taxation. Nonetheless, subsidies, especially on transport, which represent 4% of GDP, are a potential source of saving. Consolidation will be a major issue for the Grand Coalition of social democrats from the SPÖ and conservatives from the ÖVP until the next elections in 2018. The problem is that neither party is able to agree on how to proceed: the SPÖ are in favour of increasing contributions, while the ÖVP would prefer to cut spending. The restructuring is conditioned by the assumption that the bank rescue programme, at the origin of 25% of the debt, is coming to an end. The position of the banks, whose assets in Central and Eastern Europe represent 33% of GDP, has greatly improved. Against a background of a cyclical upturn, their activity in Central and Eastern Europe is again profitable overall. 90% of their outstanding loans are covered by local deposits. Nonetheless, 37% of their regional assets are located in countries classified as speculative. Moreover, while their situation is very favourable in the Czech Republic, Slovakia and Poland, it remains mediocre in Hungary, Rumania, and Croatia and poor in Russia, where they have considerable assets and high levels of non-performing loans.

 

Robust trade in services surplus and fragile trade surplus in goods

The modest current account surplus covers a robust and significant surplus on trade in services (3% of GDP) and a weak, probably temporary, surplus on trade in goods. In recent years, businesses have been confronted with an erosion of their productivity while labour costs have been rising. Moreover, they are faced with service costs made relatively high by the lack of available labour and competition. This is likely to affect their price competitiveness and result in several German clients, especially in the automotive sector, going to countries in Central and Eastern Europe for their supplies. At the moment, their technological edge, proximity to Germany, low energy and credit costs, as well as the depreciation of the euro is protecting them. This was reflected in a 5% decrease in company insolvencies in 2015, which might slightly level up in 2016 if the trend of the first half rolls on.

 

Last update : September 2016

Payment

 

Bills of exchange and cheques are neither widely used nor recommended, as they are not always the most effective means of payment.

To be valid, bills of exchange must meet relatively restrictive mandatory criteria. This deters business people from using them.

Cheques need not be backed by funds at the date of issue, but must be covered at the date of presentation. Banks generally return bad cheques to their issuers, who may also stop payment on their own without fear of criminal proceedings for misuse of this facility.

 

Bills of exchange and, to a lesser degree, cheques are more commonly used as a means of financing or payment guarantee.

 

Therefore, SWIFT and  (within EU) SEPA  transfers are widely used for domestic and international transactions and offer a cost-effective, rapid and secure means of payment.

 

Debt collection

 

As a rule, the collection process begins with the debtor being sent a demand for payment by registered mail, reminding him of his obligation to pay the outstanding sum plus any default interest stipulated in the sales agreement or terms of sale.

Where there is no interest rate clause in the agreement, the rate of interest applicable semi-annually from 1st August 2002 is the Bank of Austria's base rate, calculated by reference to the European Central Bank’s refinancing rate, marked up by eight percentage points.

 

For claims that are certain, liquid and uncontested, creditors may seek a fast-track court injunction (Mahnverfahren) from the district court via a pre-printed form. The competent district court for this type of fast-tract procedure expedites the requisite action for ordinary claims up to 75,000 EUR (previously 30,000 EUR) based on an amendment to the civil procedure code (ZPO), in effect since 1st July 2009.

 

With this procedure, the judge will issue an injunction to pay the amount claimed plus the legal costs incurred. If the debtor does not appeal the injunction (Einspruch) within four weeks of service of the ruling, the order is enforceable relatively quickly.

 

A special procedure (Wechselmandatsverfahren) exists for unpaid bills of exchange under which the court immediately serves a writ ordering the debtor to settle within two weeks. Should the debtor contest the claim, however, the case will be tried through the normal channels of court proceedings.

 

Similarly, should the judge consider the grounds for an injunction request to be insufficient it will not strictly speaking be rejected since this procedure is automatically converted into ordinary proceedings, which precludes any other recourse by the claimant.

 

Where no settlement can be reached, or where a claim is contested, the last remaining alternative is to file an ordinary action (Klage) before the district court (Bezirksgericht) or the regional court (Landesgericht) depending on the claim amount or type of dispute. The defendant has four weeks to file his own arguments.

 

With regards to the regional courts, the defendant is expected to put forward his own arguments in response to the summons and is allowed four weeks to do so.

 

A separate commercial court (Handelsgericht) exists in the district of Vienna solely to hear commercial cases (commercial disputes, unfair competition lawsuits, insolvency petitions, etc.).

 

During the preliminary stage of proceedings, the parties must make written submissions of evidence and file their respective claims. The court then decides on the facts of the case presented to it, but does not investigate cases on its own initiative. At the main hearing, the judge examines the written evidence submitted and hears the parties’ arguments as well as witnesses’ testimonies.

 

An enforcement order can usually be obtained in first instance within about ten to twelve months.

 

The civil procedure code provides that the winning party at issue of the lawsuit is entitled to receive full compensation from the losing party of all necessary legal fees previously incurred.

 

The computerization of judicial activity by maintenance of electronic files has proved to be of benefit for a better performance speed, such as automation of different types of proceedings, electronic legal communications with the parties, automated court fees and fines collections, court publications on lawsuits, commercial Register which store the data of companies, electronic signature etc.

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