Estudios Económicos
Austria

Austria

Population 8.6 million
GDP 43,413 US$
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Country risk assessment
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Synthesis

major macro economic indicators

  2014 2015  2016(f) 2017 (f)
GDP growth (%) 0.6 1.0 1.5 1.5
Inflation (yearly average) (%) 1.5 0.8 1.0 1.8
Budget balance (% GDP) -2.7 -1.0 -1.5 -1.1
Current account balance (% GDP) 2.4 1.8 2.7 2.3
Public debt (% GDP) 84.4 85.5 84.0 82.0

 

(f) Forecast

STRENGTHS

  • Central location in Europe and attractive quality of life
  • Industrial and tertiary diversification
  • Non-price competitiveness thanks to family-owned businesses and niche products
  • Comfortable current account surplus and low public deficit
  • Low debt levels of households and companies
  • High employment rate and low youth unemployment (role of apprenticeship and flexicurity)
  • 30% of energy used is from renewable sources
  • Tourism assets

WEAKNESSES

  • Reliance on the German and central/eastern European economic situation
  • Banking sector very exposed to central, eastern and south-western European countries
  • Lack of venture capital and insufficient R&D
  • Large number of levels of power and administration (federation, Länder, municipalities)
  • Low birth rate, population growth reliant on migration
  • Insufficient proportion of older people and women in the active population
  • Lack of competitiveness of public services and numerous regulated professions

Risk assessment

Continued modest growth underpinned by domestic demand

Growth will again be driven by household consumption and investment. While the benefits of the 2016 reduction in income tax will fade, household consumption will be stimulated by the increase in employment. Women, older people and refugees make up an increasing proportion of the active population. Business investment looks set to grow more slowly because of uncertainty linked, in particular, to the German elections, the incoming US administration, the changing level of the euro and shifts in monetary policy. However, the resilience of consumption and the need to replace worn-out equipment and facilities will shore it up. House building should continue to grow because of the need to house refugees and continuing low interest rates. Exports of industrial equipment, construction machinery, vehicles and automotive parts (these three categories account for 40% of total exports), chemical products and food products, but also tourism, engineering, and IT and financial services should benefit from the downward trend in the real effective exchange rate and the relative improvement of the economic situation in several large emerging countries. The future of the US market, which in 2016 become Austria's second largest export market, and the EU economy (70% of sales), particularly Germany, will be crucial. As imports grow on the back of domestic demand, foreign trade will probably again make a slightly negative contribution to growth.

 

A more balanced budget and domestic political uncertainties

After being loosened in 2016 with the income tax reduction, budget policy will likely be put back on the path towards an equivalent deficit of 0.5% by 2020. The positive effect on receipts made by the increase in capital gains tax should outweigh the additional financial burden of integrating refugees. The sale of assets purchased from struggling financial institutions by public "bad banks" should result in reduced debt. From 2017, the country's European commitments will oblige it to make annual savings equivalent to 1.25% of GDP in order to bring its debt back down to the 60% threshold over a period of twenty years. Savings in the areas of retirement and health insurance (gradual rise in the effective retirement age, tightening of disability pensions criteria) will be limited. The commitment of the Länder and numerous (small) municipalities (1/3 of public spending) might be disappointing given that they derive most of their resources from federal taxation. However, subsidies, in particular in transport, which amount to 4% of GDP, are a potential source of savings. Consolidation is conditional on the assumption that the bank rescue episode, which accounts for one quarter of debt, ended with the restructuring in October 2016 of the debt of HETA, the public structure that took on the commitments of Hypo Alpe Adrian after its bankruptcy. The situation of Austrian banks, whose assets in central and eastern Europe amount to 57% of GDP, has much improved. Against the backdrop of an economic upturn, their activity in central and eastern Europe is again profitable overall, especially in the Czech Republic, Romania and Slovakia, where they have major presences and where local deposits now exceed their outstanding credit.

Budgetary consolidation is the main area of agreement between the social democrats of the SPÖ and the conservatives of the ÖVP in the grand coalition that has been in power since 2013. However, the parties do not agree on how to go about it: the former favour tax rises while the latter prefer spending reductions. In this context, it is by no means certain that the government will make it to the scheduled end of its term in 2018. Chancellor Kern (SPÖ) or the conservatives may ask the President to hold early elections. The population seems weary of the shared domination of the two traditional main parties, and a November 2016 opinion poll put the far-right FPÖ Freedom Party in front, ahead of the SPÖ and, in a distant third, the ÖVP. However, Alexander Van der Bellen, who is close to the greens, prevailed in the second round of the presidential elections in December 2016.

 

Solid service sector surplus and good payment practices

The current account surplus reveals a solid and significant surplus in services (3% of GDP in 2015) and a slight surplus in goods (0.4%). The income balance is in deficit (1.5%), which can be explained by the repatriation of dividends by foreign investors and remittances by foreign workers. Since the crisis, businesses have faced a decline in their productivity, while their salary costs have risen more rapidly, suggesting a fall in their price competitiveness. For the moment, their technological progress, the closeness to Germany, the low cost of energy and credit, and the depreciation of the euro are protecting them. Payment practices remain good. However, the number of bankruptcies, having fallen to low levels, might rise slightly in 2016. This rise might be concentrated in traditionally fragile sectors, such as metals, publishing, paper, transport and construction.

 

Last update : January 2017

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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