Economic studies
Austria

Austria

Population 8.7 million
GDP per capita 44,233 US$
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Synthesis

major macro economic indicators

  2015 2016 2017(f) 2018(f)
GDP growth (%) 1.1 1.5 2.7 2.4
Inflation (yearly average, %) 0.8 1.0 2.0 1.8
Budget balance (% GDP) -1.0 -1.6 -1.0 -0.9
Current account balance (% GDP) 2.1 2.3 2.2 2.9
Public debt (% GDP) 84.3 83.6 78.6 76.2

 

(f): forecast

 

SECTOR RISK ASSESSMENTS

AutricheEN

STRENGTHS

  • Central location in Europe and attractive quality of life
  • Industrial and tertiary diversification, high added value
  • Solid current account surplus and low public deficit
  • Low level of household and company debt, below the European average
  • High level of employment and low youth unemployment (use of apprenticeships and flexicurity)
  • 30% of energy sourced from renewable supplies
  • Major tourist destination (11th in world)
  • High level of public R&D investment (3% of GDP)

WEAKNESSES

  • Reliance on state of German and Central and East European economies
  • Banking sector with high exposure to Central and Eastern and South-east European countries
  • Multiple layers of power and administration (federal, Länder, communes)
  • Lack of competitiveness of public services and numbers of regulated professions

Risk assessment

Continued strong growth in 2018

Strong household consumption, as well as external demand, will once again drive growth in 2018. Household confidence will be boosted by the falling unemployment rate, in particular among women and older workers, and rising real wages. Job creation, most notably in the digital field, will be rapid in order to meet the needs of companies in terms of production and technological progress. The construction and real estate sectors will benefit from the increasing demand due to immigration and refugees. At the same time, sustained foreign trade will add 0.8 point to overall growth. Manufacturing industry (20.8% of GDP), highly export-oriented and integrated into the German value creation chain, will be boosted by the growth in demand in the Central European and emerging countries. This momentum is expected to continue stimulating investment (23.1% of GDP in 2016) by Austrian companies in capital equipment, which achieved a utilisation rate of 86.9% at the end of 2017. The services sector will also grow, with the hotel, catering and retail sectors benefiting from the economic situation in German, from where almost 50% of foreign tourists come.

Inflation will remain above the European average because of the price levels in the services (particularly tourism), industrial goods, and agri-food sectors.

 

Gradual reduction of public debt and structural current account surplus

The public finances will benefit from the favourable economic situation and the deficit will be held at the government’s target level (around 1% of GDP). The high levels of employment mean strong tax revenues, in particular income taxes and social security contributions. Revenues raised by VAT are also likely to increase, boosted by household consumption. On the other hand, receipts from tax on production will decline as a result of cuts in employers’ contributions to the Familienlastenausgleichsfond (family allowance fund). The increase in public spending will continue to held in check. The measures approved in 2017, include increases in certain subsidies such as the reimbursement of 50% of employer social security contributions over the first three years following the hiring of a new employee. The cutting of financial support for refugees, the fall in the already very low cost of State debt and the reduction in spending linked with unemployment will help, partly, offset this increase. The debt will continue to shrink in 2018 with the sights set on achieving convergence with the European rate of 60%, which should be completed in ten years. The cost of the measures to support the banking sector, which was significant until 2015, will continue at a low level. Following the banking rescue operation completed in October 2016, with the restructuring of the debt held by HETA, the banking sector continued its weak recovery in 2017, reflecting increasingly strict requirements in terms of capital reserves and asset quality. Bank profitability is expected to improve in 2018, benefiting from the growth in demand for finance from companies and mortgage credit from households.

The current account surplus arises thanks to the surplus earned by services (3% of GDP in 2016), in particular those relating to tourism (31% of all services). The trade balance, slightly in the black in recent years, could shift into the red under the pressure of strong domestic demand. Exports and imports are concentrated in the same sectors (machines, transport equipment, chemical products and manufactured goods). The deficit (2.2%) in the income balance will remain because of immigrant workers’ remittances and the repatriation of dividends by foreign owned companies.

Payment behaviour remains good. The number of insolvencies, already low, continued to fall in 2017 (-6.6% in the first three quarters) and company liabilities were down 54% over the same period. The sectors with greatest exposure are construction, machines and metallurgy.

 

A coalition of the right and far-right

The ÖVP, Christian-Democrat and conservative, won the 15th October 2017 parliamentary elections, for which there was a high turnout (80%). The ÖVP won 62 of the 182 seats in the Nationalrat, ahead of both the social-democrats of the SPÖ and the far-right FPÖ party (respectively 52 and 51 seats). Sebastian Kurz, 31, the leader of the ÖVP and Foreign Minister since 2013, was appointed Chancellor by the President, Alexander Van der Bellen, with the aim of forming a government. The next coalition will apparently be formed by the ÖVP and the FPÖ. This means the end of the ten-year long rule by the ÖVP-SPÖ coalition. The government’s position with regard to the EU remains to be seen, bearing in mind the pro-European commitment of the ÖVP, which is the majority coalition partner, and the nationalist stance of the FPÖ. The terms obtained by this latter in joining the government include securing the borders, direct democracy and more restrictive policies relating to refugees. The modernisation of the civil service, investments in R&D and digitalisation will be among the government’s priorities.

 

Last update : January 2018

Payment

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

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

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 the 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.

 

Fast-track proceedings

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 EUR 75,000 (previously EUR 30,000).

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.

If the debtor has assets in other EU countries, the creditor may request the Vienna Commercial Court to issue a European Payment Order for undisputed debts, enforceable in all EU countries (except Denmark)

 

Ordinary proceedings

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. Defendants have four weeks to file their own arguments.

With regards to the regional courts, defendants are expected to put forward their own arguments in response to the summons, and are allowed four weeks to do so.

A separate commercial court (Handelsgericht) exists in the district of Vienna alone 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 the 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.

Enforcement of a legal decision

A judgement becomes enforceable when it becomes final. If the debtor does not respect the court’s judgement, the court can issue an attachment order or a garnishment order. Alternatively, the court can seize and sell the debtor’s assets.

For foreign awards, circumstances may vary depending on the issuing country. For EU countries, the two main methods of enforcing an EU judgment are the European Enforcement Order or under the provisions of the ‘Brussels I’ regulations. For non-EU countries, judgments are recognized and enforced provided that the issuing country is party to an international agreement with Austria.

Insolvency proceedings

Out-of Court proceedings

Out-of court restructuring efforts and negotiations are usually antecedent to insolvency proceedings. They constitute a means to obtain recapitalization loans in exchange for a secured creditor status.

 

Restructuring proceedings

A pre-requisite for a restructuring proceeding is that the debtor files for the opening and at the same time submits a restructuring plan. This proceeding is either self-administrated or administrated by an administration. For self-administrated restructuring, the debtor must file an application of self-administration complemented by qualified documents and a restructuring plan that provides a minimum quota of 30%.

 

Liquidation proceedings

Liquidation proceedings aim to equitably realise the various creditors’ rights. The proceedings are led by a trustee in bankruptcy which takes control of the business, sells the assets, and divides the proceeds among the creditors.

 

Retention of title

Similar to Germany, Retention of Title is a written clause in a contract which states that the supplier will retain the ownership over the delivered goods until the buyer made full payment of the price. This usually takes one of three forms:

  • Simple Retention: the supplier will retain the ownership over the goods supplied until full payment is made by the buyer.
  • Expanded Retention: the retention is expanded to further sale of the subsequent goods; the buyer will assign the claims issued from the resale to a third party to the initial supplier.
  • Extended Retention: the retention is extended to the goods processed into a new product, and the initial supplier remains the owner or the co-owner up to the value of its delivery.
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