Sectoral Report of Bank Austria Creditanstalt Economics Department: Austrian electrical and electronics industry to slow down
- Sales up by 7 percent in 2007
- Sector set to lose much of its momentum in 2008 and 2009
- Austrian electrical engineering and medical technology still popular exports
- Manufacturers’ willingness to conduct research secures future growth in sector
In 2007 the manufacture of electrical and electronic products has been growing only slightly slower than in 2006, whereby production is expected to increase by around 5 percent and sector sales by approximately 7 percent. Sales volumes are set to rise by over EUR 17.5 billion. This is one of the findings of the latest sectoral report from Bank Austria Creditanstalt (BA-CA) Economics Department. In 2007, the sector is barely losing momentum by long-term standards either: over the last ten years the production of the electrical and electronics industry has risen by 7.7 percent per annum, while sales are up by 4.3 percent.
Only in 2008 and probably in 2009 will growth in the sector significantly weaken, parallel to more moderate expansion throughout the economy as a whole. "Even if the annual growth rates do not fall under the 2 percent mark this would still signify a major dent in domestic demand for the electrical and electronics industry, since the sector benefits less from the expected increase in consumption expenditure than it suffers under the weaker growth of investments in the economy", explained sector analyst Günter Wolf. What is even more crucial for the sector that relies heavily on exports is that the pace of foreign demand is declining. The electrical and electronics industry generates almost 70 percent of its sales through exports. As things stand at present, a fall in production can be ruled out for at least the next two years. Nonetheless, growth rates will slide significantly below the 5 percent mark.
Electrical and electronic products from Austria are exported to the tune of EUR 11.8 billion, while corresponding imports total EUR 13 billion. "The foreign trade deficit with electrical and electronic products totals EUR 1.2 billion, and reflects the high competition and predatory pricing that prevails on the market", said BA-CA sector analyst Günter Wolf. "This is particularly difficult in markets where the products are very standardised and can only be manufactured at a profit in large quantities." The majority of computer and IT periphery equipment for the Austrian market is imported for example. Over and above this, in light of its relatively high manufacturing costs Austria is not really suited to being a production location for standard goods, the like of which are found in the entertainment electronics industry. In this segment, China has become the largest manufacturer worldwide.
The high trade deficit in the segment of consumer goods can be compensated for in part by surplus exports in other segments. The outstanding foreign trade results of some other sectors prove that the electrical and electronics industry in Austria is essentially competitive: particular success stories in exporting include electrical engineering, the manufacturers of electronic components and medical technology.
By European standards the Austrian electrical and electronics industry numbers among the front-runners in terms of growth. Over the last decade, production in the sector in Austria has risen by 111 percent, compared to 53 percent in the EU-25. "The optimal position of the sector on the international market reflects the high competitiveness of a key part of Austria's electrical and electronics industry, and is reinforced through the high added value in the sector", confirmed BA-CA economist Günter Wolf. With the sector generating added value of 36 percent, measured in terms of sales, it lies well above the EU-25 average of 30 percent, and is thus one of the leading European countries. This is fuelled in turn by the high level of research expenditure and ongoing innovations. Austria's electrical and electronics industry is not just one of the sectors most open to research in Europe but is also one of the most innovative. Competitiveness and sustainable growth are secured, at least in parts of the sector.
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