Austria has a small, yet open, economy with exports of goods and services accounting for 47 percent of the gross domestic product (GDP). In the past 2 decades Austria has enjoyed higher economic growth and lower unemployment than many European countries. The recession in the early 1990s led to a downward trend in annual GDP growth, from 4.2 percent in 1990 to 0.4 percent in 1994. Since 1995, however, due to positive merchandise export and investment activities brought about by membership in the European Union, the economy has experienced fairly constant growth, with annual GDP growth rates for 1998, 1999, and 2000 of 3.3 percent, 2.8 percent, and 2.7 percent respectively.
The country has a strong economic infrastructure with well developed industry, banking, transportation, services, and commercial facilities. Most of Austria's industrial and commercial enterprises are small. However, there are a number of large industrial enterprises employing thousands of people, mainly in iron and steel works and chemical plants. Overall, industry accounted for an estimated 32 percent of gross domestic product in 1998, with an average growth rate of nearly 3 percent. Though forming a relatively small component of the GDP—1.3 percent in 1998—agriculture also plays a vital role in Austria. Austrian farmers provide about 80 percent of the domestic food requirements of the country and contribute to export earnings with processed food items. Farms in Austria, like those of other mountainous European countries, are small and fragmented, with production being relatively expensive. Since Austria became a member of the EU in 1995, its agricultural sector has been undergoing reforms to comply with the EU's common agricultural policy.
Export growth was very strong during 2000. Trade with other EU countries accounts for nearly two-thirds of Austria's total imports and exports. Approximately 35 percent of the total exports went to Germany and 10 percent went to Italy. Austria's location is of immense importance for its economic growth. Vienna is one of three capitals forming a strategic Central European triangle. Slovakia's capital, Bratislava, and Hungary's capital, Budapest, are within short distances to Vienna. Expanding trade and investment in the emerging markets of Central and Eastern Europe continues to be a major element of Austrian economic activity. Exports to that region increased significantly since 1989, reaching an estimated 17 percent of Austrian exports by 1998. Austrian firms have sizable investments in—and continue to move labor-intensive, low-tech production to—the region. Although the Austrian government and businesses support the European Union's plans to offer membership to several East European countries, they insist that the candidates meet EU economic standards before accession. They have also favored a transition period for the free movement of labor and services to prevent severe competition in the Austrian labor market during accession.
For many years, the government and its state-owned industries played a primary role in the Austrian economy. Many of the country's largest firms were nationalized after World War II to protect them from Soviet takeover as war reparations. These included all oil production and refining, the largest commercial banks, and the principal companies in river and air transportation, railroad equipment, electric machinery and appliances, mining, iron, steel, and chemical manufacturing, and natural gas and electric power production. Although the government retains substantial control over the economy, many of these enterprises were privatized in the 1980s and 1990s. Through privatization efforts including the 1996-1998 budget consolidation programs and austerity measures, Austria brought its total public sector deficit down to 2.1 percent of GDP in 1999 and public debt to 63.1 percent of GDP in 1998. After the formation of a new government in February 2000, Austria promoted further economic liberalization , privatization, reform of the welfare system, and abolition of the system of political patronage (where those in political power protect and support certain businesses). An opinion poll published at the end of May 2000 showed that 43 percent of Austrians were in favor of these reforms, and 23 percent were against.
Membership in the EU has brought economic benefits and challenges. An influx of foreign investors, for example, have been attracted by Austria's access to the single European market. Austria also has made progress in increasing its international competitiveness. Since Austria is a member of the European Monetary Union (EMU), its economy is closely integrated with other EU member countries, especially Germany. Although economists have generally agreed that the economic effects of the EMU on Austria, such as the use of a common currency, have been and will be positive, support for the EU in late-2000 fell to an all-time low. According to a poll by the national newspaper Die Presse , on 27 October 2000, only 34 percent of Austrians thought that their country has benefited from EU membership; the figure was 45 percent in autumn of 1999. Some Austrians have asked for their country's complete withdrawal from the EU. It is not likely that such initiatives will get very far, however, with the Austrian chancellor having attacked the idea of withdrawal as a "betrayal of the European idea."