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World > Europe > Austria > Economy (Notes)

Austria - Economy (Notes)


ECONOMY
Austria has a well-developed social market economy with a high standard of living in which the government has played an important role. The government nationalized many of the country's largest firms in the early post-war period to protect them from Soviet takeover as war reparations. For many years, the government and its state-owned industries conglomerate played a very important role in the Austrian economy. However, starting in the early 1990s, the group broke apart, state-owned firms started to operate largely as private businesses, and the government wholly or partially privatized many of these firms. Although the government's privatization work in past years has been very successful, it still operates some firms, state monopolies, utilities, and services. The Schüssel government's privatization program further reduced government participation in the economy. The Gusenbauer government will not reverse privatizations, but does not plan to undertake any further privatizations. Austria enjoys well-developed industry, banking, transportation, services, and commercial facilities. Some industries, such as several iron and steel works and chemical plants, are large industrial enterprises employing thousands of people. However, most industrial and commercial enterprises in Austria are relatively small on an international scale.


Austria has a strong labor movement. The Austrian Trade Union Federation (ÖGB) comprises constituent unions with a total membership of about 1.2 million--about 31% of the country's wage and salary earners. Since 1945, the ÖGB has pursued a moderate, consensus-oriented wage policy, cooperating with industry, agriculture, and the government on a broad range of social and economic issues in what is known as Austria's 'social partnership.' The ÖGB opposed the Schüssel government's program for budget consolidation, social reform, and fiscal measures that favor entrepreneurs. However, because of a scandal involving a bank the ÖGB owned, the ÖGB lost much of its political influence in the SPÖ.


Austrian farms, like those of other west European mountainous countries, are small and fragmented, and production is relatively expensive. Since Austria became a member of the EU in 1995, the Austrian agricultural sector has been undergoing substantial reform under the EU's common agricultural policy (CAP). Although Austrian farmers provide about 80% of domestic food requirements, the agricultural contribution to gross domestic product (GDP) has declined since 1950 to about 2%.


Austria has achieved sustained economic growth. During the 1950s, the average annual growth rate was more than 5% in real terms and averaged about 4.5% through most of the 1960s. In the second half of the 1970s, the annual average growth rate was 3% in real terms, though it averaged only about 1.5% through the first half of the 1980s before rebounding to an average of 3.2% in the second half of the 1980s. At 2%, growth was weaker again in the first half of the 1990s, but averaged 2.5% again in the period 1997 to 2001. After real GDP growth of 0.9% in 2002, the economy grew again only 1.1% in 2003, with 2001-2003 being the longest low-growth period since World War II. In 2004, Austria's economy recovered and grew 2.4%, driven by booming exports in response to strong world economic growth, but it declined to 2.0% growth in 2005.


Primarily due to higher growth in Europe and continued export growth, Austrian GDP was a higher-than-expected 3.3% in 2006. Predictions are for the economy to grow 3.1-3.2% in 2007 and 2.5-2.8% in 2008.


Austria became a member of the EU on January 1, 1995. Membership brought economic benefits and challenges and has drawn an influx of foreign investors. Austria also has made progress in generally increasing its international competitiveness. As a member of the Economic and Monetary Union (EMU), Austria has integrated its economy with those of other EU member countries, especially with Germany's. On January 1, 1999, Austria introduced the new Euro currency for accounting purposes.


In January 2002, Austria introduced Euro notes and coins in place of the Austrian schilling. Economists agree that the economic effects in Austria of using a common currency with the rest of the members of the Euro-zone have been positive.


Trade with other EU-27 countries accounts for about 73% of Austrian imports and exports. Expanding trade and investment in the new EU members of central and eastern Europe that joined the EU in May 2004 and January 2007 represent a major element of Austrian economic activity. Austrian firms have sizable investments in and continue to move labor-intensive, low-tech production to these countries. Although the big investment boom has waned, Austria still has the potential to attract EU firms seeking convenient access to developing markets in central and eastern Europe and the Balkan countries.

Total trade with the United States in 2006 reached $12.0 billion. Imports from the United States amounted to $4.3 billion, constituting a U.S. market share in Austria of 3.3%. Austrian exports to the United States in 2006 were $7.6 billion, or 5.9% of total Austrian exports.


Facts at a Glance: Geography - People - Government - Economy - Communications - Transportation - Military - Climate - Current Time - Ranking Positions - Euro Exchange Rates
Notes and Commentary: People - Economy - Government and Political Conditions - Foreign Relations - Relations with U.S.



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Notes and Commentary
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Economy
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