Austria - Economy



The state maintains a strong presence in the Austrian economy, although private enterprise continues to occupy a central position. Basic industries, including mineral production, heavy industry, rail and water transport, and utilities, were nationalized during 1946–47 and in 1970 were reorganized under a state-owned holding company, the Austrian Industrial Administration.

Austria's period of unparalleled prosperity lasted from the 1950s through the early 1970s; the economy was characterized by a high rate of growth, modest price increases, and a favorable climate in industrial relations. By 1975, Austrian industry, the single most important sector of the economy, had more than quadrupled in value over 1945. But the general economic slowdown that followed the oil price hike of late 1973 affected Austria as it did other European countries. During 1978–81, annual real growth averaged 2.6%, about standard for the OECD countries, but there was no real growth in 1981 and only 1.1% growth in 1982, as Austria endured its most prolonged recession since World War II. The following years saw an improvement. Between 1984 and 1991, annual real GDP growth averaged 2.8%. In 1992, it was 1.7%. Unemployment, historically low in post-World War II Austria, reached 7% in 1999.

Due in large measure to a global economic downturn and resulting low domestic demand, in 2002 Austria was experiencing its worst slowdown in over a decade. However, in 2001, Austria balanced its budget for the first time in 30 years, in part due to an increase in taxes. (The only countries with higher tax burdens than Austria are Denmark, Finland, and Sweden.) However, the conservative government led by the Austrian People's Party that came into power in November 2002 gave less priority to maintaining a balanced budget, and tax reductions scheduled for 2004 and 2005 were to be partly debt financed. Austria's ratio of government debt to GDP remained high among European countries in 2001, at over 60%. Austria benefitted from its proximity to the faster-growing economies of Central and Eastern Europe in the early 2000s, but was negatively impacted by the low growth in Germany, its largest trading partner. Severe flooding in Central Europe during August 2002 resulted in extra budget outlays for flood damage. Unemployment in Austria remained low among European countries in 2002, although at around 4.8%, the rate was high compared to previous years for the country. Austria profits from a high productivity rate. It has also met with success in privatizing most of its large manufacturing firms. Austria in the early 2000s invested in high-growth industries such as telecommunications, biotechnology, medical and pharmaceutical research, and electronics. Following the mild recession in 1993, Austria's economy—driven by strong exports, investment, and private consumption—expanded an average of 2% throughout the 1990s. Due to the effects of EU membership, inflation, as measured by the consumer price index, eased to an annual average of 2.2% in 1995—the lowest since 1988; by 1998, it had dropped to 0.9%.

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