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27.07.2011

Report of Bank Austria Volkswirtschaft:
Austria benefits from EU accession, the euro and opening to Eastern Europe

  • Excluding Germany, the export surplus with the EU area amounts to an annual EUR3bn
  • Thanks to current account surplus, Austria is not a net foreign debtor any more
  • Fivefold increase of Austrian assets abroad to EUR776bn, mainly in the euro area
  • Only Norway has a higher average income and a „more equal" income distribution

Today, Austria is among the richest and most highly developed economies in the world and takes a top position in international comparison with regard to its economic key figures. Nevertheless, doubts are repeatedly arising among the population concerning the economic opening of the last twenty years. Therefore, Bank Austria has analyzed the economic benefits of the opening.

"Thanks to the stronger integration into the global economy with the EU accession in 1995, the Austrian economy has experienced a considerable boost. Improved framework conditions thanks to globalization, EU Single Market and the introduction of the euro, have considerably contributed to an acceleration of export success," Mr Bruckbauer, chief economist of Bank Austria, says. "The share of exported goods and services in the overall domestic economic performance has increased from 33 percent (before EU accession) to 58 percent today."

The integration of the financial market has turned out to be even more spectacular in this regard. The assets of Austrian households, companies, banks etc. abroad has increased more than fivefold since 1997 – from about EUR150bn to EUR776bn today, which corresponds to nearly the triple GDP (273 percent). The assets in and foreign claims towards Austria also increased in the same period of time, from about EUR190bn to EUR778bn today. While Austria still was a net debtor to other countries until recently (nearly 25 percent of GDP at the end of the 90s), the position is nearly balanced today. The balance only amounts to EUR2bn, not even 1 percent of GDP. "Thanks to the turnaround in the current account with Eastern Europe and the euro area, Austria, in total, is no longer a net debtor towards other countries," Stefan Bruckbauer explains.

Annual surplus of EUR3bn with euro area
The turnaround of the import-export ratio of Austria is based on the integration of Eastern Europe into the EU to a large extent – since 1999, the surplus has amounted to EUR55bn – but also the development in the euro area itself. Before the euro was introduced, Austria still had a deficit with the euro area, nowadays the balance is even. Excluding Germany – which Austria still has a trade deficit with – EUR35bn in total since 1999 – the surplus with the rest of the euro area amounted to about EUR34bn, nearly EUR3bn per year.

The euro area also plays an important role in the distribution of foreign assets of Austrians. Not taking into consideration direct investments, nearly 60 percent of assets (more than EUR300bn) were placed in the euro area at the end of 2010, with only a third (EUR109bn) in Germany, about the same amount as in the CEE countries. Only EUR40bn were placed in America, EUR17bn in Asia.

With EUR200bn, the largest part of foreign assets of Austrians was invested in bonds, with about two thirds in the euro area, for the most part not in Germany. Loans granted (mainly by banks) and deposits represent EUR128bn and EUR153bn of foreign receivables. In this regard, the euro area was the goal of investments for nearly 50 percent. Another EUR65bn are placed abroad as shares, also two thirds in the euro area (with one third in Germany, two thirds in others).

Even though mainly banks held foreign investments for deposits and loans, they did not for shares, bonds and funds abroad. These investments, actually half of Austrian foreign assets, are mainly owned by private households or companies, either directly or via funds and insurances.

Austria only ranks eighth among EU net contributors
Considering the success for Austria, the annual net contributions to the EU seem moderate as well. They amounted to slightly more than EUR0.4bn in 2009. Therefore, Austria is not among the largest net contributors with EUR50 per year and citizen. Luxembourg ranks first (about EUR200 per citizen), followed by Denmark, Belgium, Finland, France, Italy. The Germans follow afterwards with about EUR80 per citizen, followed by Austria. As CEE is among the largest net recipients of the EU, Austria can benefit thanks to its strong position.

Austria with second-highest income level
„The positive development of the Austrian economy in the last years is also reflected by the income level," Mr Bruckbauer explains. "There is only one country in the world with a higher income level than Austria, which has a "more equal" income distribution, which is oil country Norway."

Today, Austria holds the excellent tenth place in real median income, which means that at least half of households reach that income. An income distribution which is the "eighth most equal" among the industrialized countries of the world, confirms that the high average income is not achieved by extremely high incomes alone. A more equal income distribution than Austria can today only be observed in the three CEE countries Slovenia, Slovakia and the Czech Republic as well as the four Scandinavian countries Denmark, Norway, Sweden and Finland. Therefore, Austria has the "least unequal" income distribution in the euro area after Finland, which is made possible by the fact that Austria has the fourth-lowest unemployment rate of an industrialized country following Switzerland, Norway and South Korea and the lowest in the euro area.

Finally, Austria ranks among the ten industrialized countries in the world with the highest employment rate of people aged under 64, even though there is no other industrialized country – except Luxembourg – were people retire that young. "Even though some developments in the last years were negative, on the whole, Austria benefited from the integration considerably and this advantage is measurable for a large part of the population," Mr Bruckbauer concludes.

Enquiries: Bank Austria Economics & Market Analysis Austria
 Stefan Bruckbauer, Tel. +43 (0) 50505 - 41951
  E-Mail: stefan.bruckbauer@unicreditgroup.at

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