24You

The new online banking of Bank Austria.

BusinessNet

The online banking for companies.

olbImgAlt To the MegaCard GoGreen-youth account
MegaCard GoGreen-youth account. The free MegaCard GoGreen-youth account for everyone from 10 to 20 years, and receive a welcome gift. To the MegaCard GoGreen-youth account
18.11.2009

Current location analysis by Bank Austria Economics:
Carinthia – The South is increasingly setting its sights on external markets

  • Economic location continues the convergence process that began in the 1990s
  • EU accession and geographic location promoting structural change
  • Emigration and an aging population are the key challenges for the future

The economic location of Carinthia is continuing the convergence process that began in the 1990s and is gradually eliminating structural weaknesses. This process is being aided by a geopolitical environment that has completely changed, allowing Carinthia to go from a province located on the outskirts of Europe to a gateway to three dynamic future markets. This is the conclusion of a new location analysis by Bank Austria Economics. According to the analysis, the dominant role of the primary sector has been reduced considerably in recent years. Deficits in the corporate and knowlege-based service sectors have been reduced, and the material goods sector has been strengthened through the strategic establishment of production plants specialising in higher-quality technology. With 2.9 per cent annual gross regional product (GRP) growth between 2004 and 2008, Carinthia came in above the Austrian average.

Just behind the top three in terms of standard of living
In the past, Carinthia's small geographical area and its lack of large cities have inhibited its economic development to a certain extent. The region's standard of living has increased slightly faster than the national average since the mid-1990s, but with a per capita GRP of just over EUR 29,000, Carinthia's economic performance is currently only 85 per cent of the Austrian average. "If you look at real purchasing power, things appear to be much better," explained Stefan Bruckbauer, Bank Austria's chief economist, who added, "Thanks to a moderate cost of living, Carinthia's standard of living is 97.2 per cent of the Austrian average, putting the province just slightly behind the leaders, Lower Austria, Vienna and Upper Austria."

Nevertheless, Carinthia's somewhat outdated economic structure is still in need of modernisation. The primary sector continues to play a bigger role than in other provinces, and tourism and construction are also very important. The material goods industry is primarily geared towards resource-dependent sectors and its share in economic performance is only slightly above average. Increasing the currently limited significance of high-quality corporate and knowledge-based services should be the focus of future development efforts.

R&D ratio above the Austrian average
"The restructuring of Carinthia's economy can best be seen in the improvement in the quality of the secondary sector," said Bruno Waldl, Bank Austria's provincial manager for corporates. "Here, we can see a clear trend away from the low-technology sector towards more advanced technology segments." The proportion of employees in these segments has increased from 9 per cent to nearly 16 per cent since Austria's accession to the European Union in 1995. In geographical terms, the number of people employed in the high-tech segment has increased particularly dramatically in the area surrounding Villach thanks to the establishment of the electronics industry there.

The R&D ratio, i.e. the ratio of research and development expenditures to economic performance, has increased considerably since the late 1990s, rising from 1.1 percent of GRP in 1998 to over 2.5 per cent of GRP in 2006 (the last time data was collected). This corresponds to roughly EUR 400 million in absolute terms. "Carinthia has a higher level of research investment than the Austrian average. This is primarily attributable to companies, which are responsible for around 80 per cent of these investements," said Waldl. Only in Styria and Upper Austria are companies even more involved in research.

External trade volumes have grown significantly, company start-ups lagging behind
One advantage Carinthia has as an economic location is certainly its favourable location at the gateway to three robust economic regions. This is proven not least by the fact that Carinthia was able to attract 24 of the 256 corporate location projects implemented throughout Austria by the Austrian Business Agency in 2008.

Many companies from the region have used this comparative advantage along with their willingness to take risks, strong vision and technical expertise to achieve success beyond the borders of Austria in recent years. This is demonstrated impressively by the dramatic increase in the region's external trade volume and export share as well as the regional shift in the flow of goods. "The ratio of exports to GRP has increased by 10 per cent over the past decade and currently stands at 35 per cent. Along with the main trading partners, Germany and Italy, the neighbouring growth markets – particularly Slovenia and Hungary – are gaining in significance," said Stefan Bruckbauer, Bank Austria's chief economist, in his analysis of the situation. In addition, the surplus in the international exchange of goods in excess of 4 per cent clearly shows the high level of competitiveness enjoyed by local companies.

In contrast, the number of company start-ups has declined slightly over the last five years despite the increasing trend towards outsourcing. For every 100 active companies in Carinthia, there are around 7 company start-ups each year, while the average is over 7.5 for Austria as a whole. The below-average number of bankruptcies, however, indicates that Carinthia offers an attractive environment for doing business. "The key challenges that the regional government will face in the future are emigration and the aging population," said Bruckbauer. According to Statistics Austria's current estimate, Carinthia's population will shrink by 7,000 (1.3 per cent) to 553,000 people over the next 25 years. The labour force will decline by over 10 per cent in the same period. In Austria as a whole, the population is expected to grow significantly as a result of immigration, and the labour force is expected to see at least moderate growth.
 
"Location Carinthia" brochure: Economic handbook and guide for funding programmes
Together with the regional management for Carinthia, Bank Austria's economists have prepared a detailed brochure which puts Carinthia's attractiveness as a location, competitiveness and growth potential to the test. The second section of the "Location Carinthia" brochure gives an overview of funding possibilities, including national funding programmes and joint financing by the EU. As a member of UniCredit Group, Bank Austria has access to a global network with a particularly strong focus on Germany, Italy, and Central and Eastern Europe. This guide from Bank Austria is intended to help companies to be well-equipped for impending economic challenges, regardless of whether they are at the start-up, consolidation or expansion stage. 

The "Location Carinthia" brochure is part of a new series of analyses of the federal provinces. It is available in Bank Austria's branches or can  here  be viewed online.

Enquiries: Bank Austria Press Office Austria
Tiemon Kiesenhofer, Tel. +43 (0) 50505 - 52819
E-mail: tiemon.kiesenhofer@unicreditgroup.at

 back to the summary