Article17 September 2018Reading time about 3 minutes

Austria: Still enjoying the isle of happiness

2018 marks another boom year for the Alpine republic, but for 2019 and 2020 we expect a gradual return to average growth levels cooling down to 2.2% and 1.8% respectively 

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Economic performance driven by domestic and foreign impulses

With first-quarter GDP growth coming in at 0.8% quarter on quarter and second-quarter growth at 0.7% QoQ, Austria’s economy has seen a strong first half of the year. While we expect the current strong momentum to abate as the peak of the current economic cycle has been reached, a robust growth performance of 2.8% for 2018 is pencilled in. 

Although risks to the growth outlook stem from foreign uncertainty factors such as a further escalation of the US trade conflict with major trading partners, the impact should be negligible for the Austrian economy this year. For 2019 and 2020 we expect a cooling down to 2.2% and 1.8% respectively.

Cooling down from high levels

Thomson Reuters
Thomson Reuters

The EU presidency isn't really a big deal

As far as the country’s EU presidency is concerned, the focus is likely to shift from the migration issue to Brexit and the closing window of opportunity for a deal. However, in Austria, the chairing isn't really on people’s radars. 

According to a recent survey, 60% say they are ill-informed about the presidency, while only 19% attest the government is doing a good job and see new impulses on the EU stage. With less than a year to go until European parliamentary elections, the government has to step up its game, especially since 77% think the government’s far-right junior coalition partner, the Freedom Party of Austria (FPÖ), would like to drop the EU presidency as it is an unnecessary cost and doesn't bring any benefits. Overall, 60% are in favour of scrapping the EU presidency.

Nevertheless, the government still has more than half of its presidential term to go, packed with foreign and EU-related uncertainty factors. With the economy currently on auto-pilot, it also has the opportunity to make an impression not only on the international stage but also domestically.

The Austrian economy in a nutshell (% YoY)

Thomson Reuters, all forecasts ING estimates
Thomson Reuters, all forecasts ING estimates