UniCredit Bank Austria Analysis of the Economies of the Federal States for 2018 and Outlook for 2019:

In 2018, a particularly positive economic climate prevailed in the south – now the heaviest gloom is threatening the industry-oriented federal states in 2019

  • Gross regional product: The growth leaders are Styria and Carinthia 
  • Federal states with a high degree of industry in 2018 are among the leaders in terms of growth
  • Federal states in the West also benefit from strong tourism and trade
  •  As in 2017, in the previous year, there were some significant declines in the unemployment rate in all regions
  • Outlook for 2019: Due to the global economic slowdown, a decline in growth of 1.4 percent is expected for Austria, with the strongest deterioration in the industry-oriented federal states
  • Federal states are affected by international uncertainties such as Brexit and the trade conflict with the USA to different extents

 “The two top performers in terms of growth in 2018 come from the south. Styria recorded the strongest growth, with 3.4 percent, followed by Carinthia at 3.2 percent. As in 2017, the federal states with a high degree of industry and a high export quota also had an advantage in the previous year, as they were able to benefit most from the good global economic situation,” says UniCredit Bank Austria chief economist Stefan Bruckbauer. 

However, these regions are most affected by the slowdown in the global economy, which had already begun in the second half of 2018. As a consequence, after the sharp rise in real GDP in the previous year, growth of 2.7 percent in Austria will slow down significantly to 1.4 percent, with growth being driven by domestic demand.

Industry and business-related services are the growth drivers
“In the previous year, the Austrian industry recorded a similarly strong growth rate to 2017 in the amount of 4.7 percent. In the wake of the strong industry and the export sector, business-related services, such as labour recruitment and the transport industry, also performed extraordinarily well. For this reason, in 2018, the industrially strong federal states were also found among the leaders in terms of economic growth,” emphasises UniCredit Bank Austria economist Robert Schwarz. 

Federal states with strong industry among the leaders
Styria and Carinthia were followed in rankings by Upper Austria and Lower Austria, each with 3.1 percent growth, along with federal states with a strong material goods industry. Vorarlberg is also an industrial state, but was not able to keep up with the other industrial strongholds in the previous year, with an increase in the regional economy of 2.8 percent. Growth in Salzburg and Tyrol was also 2.8 percent, as they also benefited from a good year of tourism and strong trade. Burgenland, with its small industrial share, grew by 2.1 percent. The strong impetus from agriculture, which contributed one-third of the high growth in 2017, was lacking in the previous year. Vienna, the federal state with the lowest industrial share, still achieved growth of 2 percent due to positive developments in the energy sector, tourism, and business-related services. 

In foreign trade, the EUR 150 billion mark was exceeded for the first time in the previous year in terms of exports of goods due to the good global economy, with an increase of 5.7 percent compared to 2017. On federal state level, Styria achieved by far the largest export growth with significantly more than 10 percent. Vienna is at the lower end of the export rankings. The capital was the only region that had to record a decline in exports. The other countries are in the range between 4.5 percent and 7 percent export growth. 

Solid growth in the construction industry in 2018
The real value creation of the Austrian construction industry increased by 2.6 percent in the previous year, and was therefore significantly lower than the real growth of industry, as was the case in 2017. The best construction climate was found in Upper Austria and Vorarlberg in 2018. There was a strong expansion of the discontinued production in the building construction and construction industry. 

Economic growth slowing in 2019 
In the second half of the previous year, clouds had already started to gather in the global economic sky. UniCredit Bank Austria economists expect that economic growth in Austria will slow down significantly to 1.4 percent for the full year 2019. “In 2019, it is expected that all federal states will record weaker growth than in 2018,” says Bruckbauer, adding: “The economic climate in the industry-oriented regions will experience the biggest slowdown.” 

The unemployment rate fell again in all federal states
For the second year in a row, the unemployment rate in all federal states fell in the previous year. The average unemployment rate in Austria in 2018 was 7.7 percent, after 8.5 percent in 2017. At 4.9 percent, Tyrol had the lowest unemployment rate in Austria for the first time, while in spite of a sharp decline, at 12.3 percent, Vienna continued to post the highest rate by far. “Once again for this year, we expect a drop in the unemployment rate in all federal states despite the pace of growth slowing,” says Schwarz. 

Federal States affected by Brexit and US protectionism in different ways
In 2017, the British demand for Austrian goods and services produced a value added of 4.3 billion euros or 1.1% of GDP in Austria. At federal state level, the trade links between Vorarlberg and the United Kingdom are the greatest in relation to regional added value. Exports from the rural area to the UK added value of 1.6 percent of the regional product. Burgenland is the least dependent on the UK, accounting for 0.8 percent of its value creation. 

On 15 May, the US government decided to postpone the introduction of higher tariffs on cars and car parts by up to 6 months, but the risk of protectionist measures in this area remains high. An analysis by UniCredit Bank Austria economists shows that a decline in American demand for European cars due to tariff increases would affect the automotive industry in Styria and Upper Austria in particular. “Styrian car exports contribute about 0.8 percent to the overall regional value creation in Styria,” says Schwarz. However, in Upper Austria, the second most affected federal state, the vehicle exports account for only 0.2 percent of value added. 

In general, it can be said that a hard Brexit or an American increase in tariffs on European cars could have a noticeable impact on economic growth and employment, particularly in the industrially strong federal states such as Styria, Vorarlberg and Upper Austria. 


UniCredit Bank Austria Economics & Market Analysis Austria
Robert Schwarz, Tel. +43 (0) 50505 - 41974;
Email: robert.schwarz@unicreditgroup.at