Economic Analysis
Austria

Austria

Population 8.8 million
GDP per capita 44,347 US$
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Country risk assessment
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Synthesis

major macro economic indicators

  2016 2017 2018 (e) 2019 (f)
GDP growth (%) 1.5 2.6 2.7 1.7
Inflation (yearly average, %) 1.0 2.2 2.1 2.1
Budget balance (% GDP) -1.6 -0.8 -0.3 0.0
Current account balance (% GDP) 2.1 2.1 2.0 2.2
Public debt (% GDP) 83.6 78.3 74.5 71.0

 

(e): Estimate. (f): Forecast.

STRENGTHS

  • Industrial and tertiary diversification; high added value
  • Comfortable current account surplus and balanced government budget
  • More than 30% of energy sourced from renewable supplies
  • Major tourist destination (12th in the world)
  • High public expenditure on R&D (3% of GDP)

WEAKNESSES

  • Dependent on the German and Central/Eastern European economies
  • Banking sector exposed to Central, Eastern, and South-Eastern European countries
  • Multiple layers of power and administration (federation, Länder, municipalities)

Risk assessment

Growth weakened by the external environment

Austrian economic growth is expected to mark time in 2019. Domestic demand will remain robust, thanks to lively private consumption, which will benefit notably from the increase in household disposable income resulting from a tax cut for families (Familienbonus, or “the family bonus”), as well as the resilience of investment, linked to sustained levels of business confidence and high production capacity utilisation (88.7% in the third quarter 2018). Nevertheless, external demand is expected to be more sluggish, which will affect manufacturing industry. This export-oriented sector could suffer, in particular, from the expected growth slowdown in Germany, the destination of 30% of Austrian exports. In this context, a possible escalation in protectionism would also hinder export growth. However, the services sector is expected to be more resilient, relying more heavily on domestic demand. The same will apply to construction, also helped by immigration, which will continue to boost Austrian real estate. Following the bank bailout that ended in October 2016, with the restructuring of HETA's debt, the banking sector will continue to recover, notably thanks to tighter capital and asset quality rules. Bank profitability should improve further in 2019, lifted by swelling demand for corporate financing and household mortgages.

In 2019, inflation is expected to remain stable, close to the ECB's 2% target and the European average. Domestic demand will continue to exert upward pressure on the price level, while the stabilisation of oil prices should limit the increase.

Improving public and external accounts

The government will maintain its policy of improving the public accounts and is expected to achieve its objective of a balanced government budget in 2019. In fact, expenditure is not expected to increase significantly and its GDP share is forecast to decline. This will be achieved via limited growth in the public sector wage bill and efficiency gains within government, among other methods. Nevertheless, spending on research and development and technological equipment is set to increase. At the same time, revenues, mainly from taxes (27% of GDP in 2017), are expected to increase by more, leading to a further reduction in the public debt burden.

The current account surplus is expected to increase slightly in 2019 on the back of tourism revenues, evidenced by the surplus in the balance of services (2.8% of GDP in 2017). While the income surplus could improve, the goods balance – which was slightly positive in 2018 – will be hurt by domestic demand (which favours imports) and slower export growth. Imports and exports alike will remain concentrated in the same sectors, namely machinery, transport and chemicals. However, the current account surplus will be absorbed by foreign investments, especially in the form of portfolio investments (net flow equivalent to 5% of GDP in 2017).

Austria continues its shift to the right

The Austrian People's Party (ÔVP) – a conservative, Christian democrat party – won the October 2017 parliamentary elections with more than a third of the seats in the Nationalrat. Following these elections, President Alexander Van der Bellen appointed Sebastian Kurz, former Minister of Foreign Affairs and leader of the ÔVP, as Chancellor. At the age of 32, Mr Kurz leads his government, a coalition between the OVP and the Freedom Party of Austria (FPÔ). The rapprochement with this nationalist party and the rightward shift in immigration policy, in particular by cutting benefits for asylum seekers, are resonating in a country that saw substantial inflows of migrants during the 2015 migration crisis. Austria’s tightening of migration policy has led to disagreements with many EU countries. A new law (which is set to enter into force in 2019) to index family allowances to the standard of living in workers' home countries if they have left their children behind could create tensions, because it would contravene European law. However, the government remains pro-European and has ruled out a referendum on leaving the Union. Austria also held the Presidency of the European Council in the second half of 2018.

 

Last update : February 2019

Austria

Payment

SWIFT and SEPA (within the EU) transfers are commonly used for domestic and international transactions and offer a cost-effective, quick, and secure means of payment.

Bills of exchange and, to a lesser degree, cheques are most commonly used as a means of financing or payment guarantee. Nevertheless, neither are widely used nor recommended, as they are not always the most effective means of payment., bills of exchange must meet relatively restrictive mandatory criteria to be valid, which deters business people from using them. In parallel, cheques need not be backed by funds at the date of issue, but must be covered at the date of presentation. Banks normally return bad cheques to their issuers, who may also stop payment on their own without fear of criminal proceedings for misuse of this facility.

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 August 1, 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 €75,000 (previously €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. However, should the debtor contest the claim, 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

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

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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