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Economy of Austria

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Through Gross domestic product, Privatization and Welfare state

Lab · Class 11How Courts Work

Labor movements are particularly strong in Austria, and they have a large influence on labor politics. Next to a highly developed industry, international tourism is the most important part of the national economy. The economy of Austria's average GDP is 13th growth in OECD countries, from 1992 to 2017. In Austria, 1.37% over average population growth is the strong factor.

Germany has historically been the main trading partner of Austria, making the Austrian economy vulnerable to rapid changes in the German economy. However, since Austria became a member state of the European Union, it has gained closer ties to other European Union economies. This development reduced its economic dependence on Germany. In addition, Austria's membership in the EU has drawn an influx of foreign investors.

They were attracted by Austria's access to the European Single Market and the country's proximity to the aspiring economies of the European Union. Growth in GDP has accelerated in recent years, and reached 3.3% in 2006.

In 2024 Austria has a very high, $58,669 nominal GDP per capita ranked 13th.

Vienna was ranked the fifth richest NUTS-2 region within Europe (see Economy of the European Union), with its GDP reaching €38,632 per capita. It was trailing behind Inner London, Luxembourg, the Brussels-Capital Region and Hamburg.

Growth had been steady between 2002 and 2006, varying between 1 and 3.3%. After hitting 0% in 2013, growth had picked up a little. As of 2016, growth was set at 1.5%.

History

Foundation and Interbellum

First Austrian Republic, founded as a result of the dissolution of Austria-Hungary, inherited an economy battered by the ravages of the First World War, namely:

  • The abolition of the gold standard in 1914.
  • Provision by the central bank of credit to the state, increasing the money supply.
  • The balance-of-payments deficit caused by the Austrian need to import food and fuel, devaluing the krone (the Austrian currency at the time).
  • The use of deficit spending to finance food subsidies, leading to a 12-fold increase of banknotes in circulation.

A number of international relief schemes failed to garner enough support while a report by Sir William Goode argued that the Austrian economy would collapse without swift foreign intervention. As such, the Austrian economic crisis stretched into its second year, with inflation running at 99%.

League of Nations Bailout

Source:

With annual inflation running at 2,877%, the League of Nations was officially appointed to organise an Austrian reconstruction plan in August 1922. The League scheme was based on the view that Austrian troubles as a result of an inability to pay for necessities and obtain credit, and therefore, an Austrian financial revival was critical to Austrian survival. To this end, the plan was focused solely on financial reconstruction. Austria would receive loans raised from international money markets and the Austrian public, which would be secured on customs and tobacco taxes. In exchange, Austria would in effect lose sovereignty over its economy, agreeing to:

  • Relinquish control over the mints to an independent bank, with the aim of returning to the gold standard.
  • Terminate the printing of money by the central bank.
  • Eliminate the budget deficit (requiring the implementation of austerity measures and monetary control).

The measures took effect in 1923. Short-term effects were impressive; during the announcement to undertake Austrian reconstruction in August 1922, public confidence soared. Foreign currency holdings were converted back into krone, stabilising the currency. This allowed the Austrian Foreign Exchange Agency to finally intervene to fix the krone to the dollar, something that the wild gyrations of the past had not permitted. Capital rushed back into Austria, and domestic prices stabilised, pronouncing the end of hyperinflation.

The steam ran out shortly after implementation. Growth averaged 0.35% per annum until 1929, unemployment leapt five-fold, bankruptcies increased 41-fold, and the trade deficit doubled.

Anschluss

Austria was annexed by Nazi Germany in 1938, and consequently lost control of its own economic policy until the formation of the Second Republic in 1945.

Post World War II

Ever since the end of the World War II, Austria has achieved sustained economic growth. In the soaring 1950s, the rebuilding efforts for Austria lead to an average annual growth rate of more than 5% in real terms and averaged about four-point five percent through most of the 1960s. Following moderate real GDP growth of 1.7%, 2% and 1.2%, respectively, in 1995, 1996, and 1997, the economy rebounded and with real GDP expansion of 2.9 percent in 1998 and 2.2% in 1999.

Austria became a member of the EU on 1 January 1995. Membership brought economic benefits and challenges and has drawn an influx of foreign investors attracted by Austria's access to the single European market. Austria also has made progress in generally increasing its international competitiveness. As a member of the economic and monetary union of the European Union (EMU), Austria's economy is closely integrated with other EU member countries, especially with Germany. On 1 January 1999, Austria introduced the new Euro currency for accounting purposes. In January 2002, Euro notes and coins were introduced, replacing those of the Austrian schilling.

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