Bank Austria Economics Department analysis of the provinces:
Austria's provinces slowly leaving economic woes behind
- Burgenland once more grew fastest in 2013, followed by Upper Austria and Styria
- In spite of the weak 2013, the economic output of all federal provinces – with the exception of Carinthia – is now higher than pre-crisis levels again
- Industry was a decisive growth factor for the Austrian economy in 2013
- Construction made a modest contribution to economic growth
- The services sector lost some ground – but boosted activity in Tyrol and Vorarlberg
- In spite of record unemployment, the trend towards record employment will continue in 2014
- Better growth prospects for all federal provinces in 2014: industrial provinces such as Upper Austria and Vorarlberg slightly ahead; service hubs could improve from the second half of the year
The global economy was marked in 2013 by the weakest development since the end of the 2008/2009 crisis. Global economic growth dropped to 3 percent, first and foremost due to the weak economic activity in emerging markets, but industrialised countries celebrated a comeback in 2013. Growth in the USA picked up during the year, eventually coming in at 1.9 percent for the 12-month period. And above all, the eurozone moved onto a recovery path, exiting recession from the middle of 2013. Clearly, the weak international economic activity constituted a significant drag for all federal provinces in 2013. The economic performance of most federal provinces was lower than in 2012 because of the lack of stimulus from abroad, but also owing to the faltering consumption. That said, economic output is now higher than before the crisis in almost every federal province, with only Carinthia lagging somewhat behind.
Burgenland grows fastest in 2013 again
"Burgenland followed on effortlessly from its victory in 2012, and posting growth of 3.1 percent in 2013 was once again top of the growth charts in our provincial analysis. This growth was carried by industry in Burgenland, which was able to expand most dynamically thanks mainly to a business relocation", said Dieter Hengl, Head of Corporate & Investment Banking at Bank Austria, summarising the situation, before talking about the key findings of Bank Austria's provincial analysis: "Thanks to the global revival from the middle of 2013, the federal provinces which have strong industrial sectors and a high export focus were able to exploit their structural advantages. Upper Austria in particular (ranked second with economic growth of 1.3 percent) and Styria (ranked third with growth of 1.1 percent) were able to harness the budding international economic upswing. Overall these general conditions were somewhat more favourable for the western provinces." According to the calculations of the Bank Austria economists, economic output lagged slightly behind the previous year in three federal provinces: in Vienna, Lower Austria and particularly in Carinthia, however, the negative influencing factors from abroad and the weak consumption proved to be too strong. This meant that economic activity in the east and the very south of Austria was the weakest in 2013.
Growing tailwind from Europe bolsters industry
"The consequences of the sluggish global economy in 2013 were felt in particular by manufacturing businesses with an export focus. Following growth of 1.2 percent in 2012, industrial output in Austria in 2013 rose by a mere 0.3 percent. Even this minimal growth could only be achieved thanks to the nascent recovery in the eurozone, which was noticeable in some sectors from the middle of the year", explained Stefan Bruckbauer, Bank Austria's chief economist, analysing the key industrial trends. Under this climate, developments in 2013 were very varied across the individual sectors. Automobile construction was one of the growth pillars of Austrian industry, expanding by more than 7 percent. Production levels were raised in 2013 in the sectors of electronic and optical goods manufacturing, pharmaceuticals and plastics as well as metals production, while the electronics industry and the energy sector – owing amongst other things to the mild winter – suffered setbacks. Industrial companies in Upper Austria and in Styria made the most of the incipient recovery growing by roughly 2 percent. Apart from Burgenland, which benefited particularly from the one-off impact of a business relocation, industry in all other federal provinces failed to reach 2012 growth levels, with production especially in Carinthia and in Vienna lagging significantly behind.
Construction makes positive contribution to growth in six provinces
In 2013 construction made a moderately positive contribution to economic growth in Austria: on average, the national construction output index rose 0.6 percent. Construction growth was generally driven by building, especially residential buildings and renovations, while civil engineering in particular was pulled down by the decline in public orders due to tight budgets at all levels of administration. Construction boosted growth in six federal provinces. Indeed, the sector generated above-average growth in Burgenland, Tyrol and Vorarlberg as well as in Upper Austria. In Carinthia, Lower Austria and Salzburg, by contrast, construction trends weighed down on economic development.
Services sector loses some ground – but boosts activity in Tyrol and Vorarlberg
The Austrian services sector closed the year 2013 with a modest decline in value added, despite the slight upwards trend noted toward the end of the year. In four federal provinces, namely Carinthia, Lower Austria, Upper Austria and Styria, however, the sector pulled growth down because commerce came under pressure due to the strained labour market conditions. Moreover, tourism revenues failed to keep up pace with the increase in overnight stays, while business-related services provided little stimulus thanks to the sluggish industrial activity. By contrast, the sector made a substantial contribution to growth in Tyrol and Vorarlberg.
Situation intensifies on labour market in all federal provinces
The year 2013 was one of record unemployment for the Austrian provinces, but also one of record employment. Unemployment increased by double-digit rates in most federal provinces. Upper Austria recorded the fastest increase in jobless figures in 2013 relatively speaking, but it still has the lowest average annual unemployment rate in Austria at 5.1 percent. Vienna still posts the highest rate in Austria at 10.2 percent. In spite of the sluggish economic activity, the increase in employment in 2013 did not come to a complete standstill in most federal provinces. The number of those employed rose on average by 0.5 percent – and even by more than 2 percent in Tyrol, which leads the way in this respect. "2013 was once more a year of record employment as new all-time highs were reached in seven out of nine federal provinces thanks to the services sector", said Bruckbauer, before adding: "Unfortunately, 2013 was also a year of record unemployment." We assume that all federal provinces will see a continued rise in unemployment during 2014 – with the figure for the country as a whole rising from an average 7.6 to at least 7.8 percent. In the federal provinces, these numbers range from 5.3 percent (Upper Austria) to 11 percent (Vienna).
Faster economic growth expected in nearly every federal province in 2014
The growth prospects for 2014 are more favourable for all federal provinces than in 2013 because overall conditions have started to improve: the recovery in the eurozone is taking root and becoming increasingly tangible for the Austrian economy. Export industries are enjoying more and more stimulus, and therefore industry will be a more crucial growth pillar in 2014. Production growth is set to rise to about 4 percent. "The investment backlog is slowly starting to ease. Given the ongoing upswing in the eurozone coupled with positive demand effects for the national economy, we expect there to be a noticeable expansion of investments in 2014 carried by the favourable financing conditions. We reckon investment in Austria will go up by almost 5 percent in real terms", said Hengl confidently.
Demand will switch even more from inputs and capital goods to the consumer sector. Bank Austria’s economists believe growth will focus on mechanical engineering, metals processing and still on the automobile supply industry. In 2014 the services sector will be slow to get going as the labour market remains under pressure: unemployment continues to rise while employment trends still remain subdued. Moderate growth is expected on the whole, however, whereby the dynamics in the sector should pick up during the year, strengthening provinces such as Vienna in the second half of the year which specialise in services.
"Growth in 2014 will be broadly-based, with more balanced opportunities available for every federal province. This is why we expect the growth differences between the provinces will be somewhat narrower than in the previous year. In our opinion, industrial provinces on a broad footing can look forward to the best prospects. We expect the economies in Upper Austria and Vorarlberg to grow by up to three percent, while Burgenland should still be able to keep up pace, despite the phasing out of the afore-mentioned one-off factor. Salzburg is likely to bring up the rear in 2014 in terms of growth, but still expand by one percent, thereby closing the gap on the leaders compared to the previous year", said Hengl, talking about this year's growth forecasts.
"All told the Austrian economy will grow visibly more strongly in 2014 than in 2013 thanks to the better climate. We predict GDP growth of roughly 2 percent in 2014 after just 0.4 percent in 2013", emphasised Bruckbauer.
Enquiries: Bank Austria Press Office Austria
Volker Moser, Tel. +43 (0) 50505 - 52854
A detailed analysis of economic trends in the Austrian federal provinces including a forecast for 2014 can be found in Bank Austria's "Bundesländer Überblick" (Review of the Provinces) publication. This brochure can be downloaded free from the website of Bank Austria.