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26.11.2018

UniCredit Bank Austria economic outlook for the federal states for the full year 2018:
Federal states with strong industrial sectors break the 3% growth barrier

  • Growth ranges from 1.9 per cent in Vienna to 3.3 per cent in Upper Austria
  • This year, the economy is developing uniformly in regional terms, with advantages for federal states with strong industrial sectors
  • With the exception of Vienna, industry has a large share in economic growth in all federal states, led by Carinthia and Styria
  • The construction industry is the strongest driver in Upper Austria, Vorarlberg and Lower Austria
  • In the service sector, cyclically sensitive service providers are recording the most dynamic growth in areas such as labour placement, information technology and transport, benefiting Vienna, Lower Austria and Burgenland in particular
  • Tourism companies are enjoying new overnight accommodation records, with the tourism strongholds of Tyrol, Salzburg and Vienna being the main beneficiaries here
  • As in the previous year, the unemployment rates in all the federal states will fall this year as well, sharply in some cases, with the strongest declines being in Tyrol and Styria

In the first three quarters of this year, the real increase in Austria’s gross domestic product was 2.9 per cent year-on-year. Growth was based on very dynamic investment and export performance and robust growth in private consumption. “The broad sectoral economic growth leads to relatively small growth differences between the federal states, although this year, as in the previous year, the federal states with a high share of value added in the industrial sector have an advantage,” says UniCredit Bank Austria’s chief economist Stefan Bruckbauer. 
According to estimates by UniCredit Bank Austria economists, all provinces will show solid growth in the range of 1.9 per cent in Vienna to 3.3 per cent in Upper Austria in 2018 as a whole. In addition to Upper Austria, Carinthia (+3.2 per cent), Styria (+3.1 per cent) and Lower Austria (+3 per cent) are expected to break the 3 per cent mark this year in terms of the increase in real regional production. Growth in Tyrol (+2.9 per cent), Salzburg (+2.9 per cent) and Vorarlberg (+2.9 per cent) is slightly above the national average, while Burgenland (+2.5 per cent), together with Vienna, is at the bottom of the rankings by state. 

Industry as growth driver
In the first three quarters, value added in the domestic industrial sector grew by 5.5 per cent in real terms compared with the same period of the previous year. Industrial companies in Carinthia, Styria and Upper Austria contributed most to the growth in regional production this year. The strongest sectors in these three federal states are the electrical industry, the automotive industry and the metals industry, which are also recording the strongest performances throughout Austria. Despite increasing global risks, foreign demand for Austrian goods remains a major growth driver. “Austria’s export volume for 2018 as a whole is expected to exceed 150 billion euros, an increase of 6 per cent in nominal terms over the previous year. Styria (+9.3 per cent), Salzburg (+8 per cent) and Carinthia (+7.8 per cent) are recording significantly above-average export growth this year,” says UniCredit Bank Austria economist Robert Schwarz.

Large regional differences in the construction industry
Compared to the industrial sector, the performance of the construction industry varied considerably more by region this year. In Upper Austria, Vorarlberg and Lower Austria, the construction industry is developing very dynamically, supported by strong growth in sales in the engineering and construction sectors. In Tyrol and Burgenland, production growth in the construction sector is well below average. The stagnation of the Burgenland construction industry is mainly due to the fact that this sector performed extremely well the previous year. This will make it difficult for Burgenland to achieve growth in comparison with 2017.

Cyclically sensitive service industries and tourism grow at above-average rates
In Austria, the service sector accounts for almost 70 per cent of total value added. The share of the tertiary sector in economic growth in the first nine months of 2018 was slightly above 50 per cent, which is significantly below average. The provision of economic and technical services is growing in all federal states, in some cases strongly. This sector group includes the placement of workers, architecture and engineering firms and building management. 

Above-average growth in information technology is to be found above all in Carinthia, Burgenland and Upper Austria. Real added value in the transport and warehousing sector is growing by well over 4 per cent in all federal states, with the increase even rising above 6 per cent in Styria, Lower Austria and Upper Austria. Gastronomy/accommodation is benefiting from the record number of overnight stays in tourism, which is particularly gratifying for the tourism centres of Tyrol, Salzburg and Vienna. 

Further recovery in the labour market
The good economic situation throughout Austria is reflected in the labour market. “For the second year in a row, we are seeing sharp declines in unemployment rates in all provinces this year,” says Schwarz and adds: “All the federal states have in common the fact that many companies are desperately looking for skilled workers.” The regionalisation of the list of occupations with a shortage of skilled workers, which is to come into force with a corresponding amendment as of 1 January 2019, is an attempt to combat this shortage. The main beneficiary of this change should be the tourism business in western Austria. Cooks from countries outside the EU, for example, will then be able to work legally in Tyrol.

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