UniCredit Bank Austria Economy Analysis of the federal states 2024 and outlook 2025:
Economy on the back burner - federal states remain in crisis mode
- Almost all federal states with a decline in economic output in 2024 - only Vienna grew slightly, the industrial regions weakened the most
- Industry and the construction sector remain the main factors holding back growth
- Industry-related services and trade also suffered from the weak economic environment
- Despite robust overnight stay figures, there was a decline in tourism value added
- Positive impetus came from the public sector, financial services and real estate
- Unemployment has risen in all regions, with employment growth strongest in Vienna
- Federal states are affected to varying degrees by the US tariffs
- A slight recovery is expected in all regions in 2025, but unemployment rates will continue to rise
The economic situation in Austria in 2024 was strongly characterized by economic and structural challenges. „As in 2023, the industrial regions once again experienced a setback without any significant positive impetus from the service sector,” analyzes UniCredit Bank Austria Chief Economist Stefan Bruckbauer.
Vienna is the only federal state with growth, Upper Austria brings up the rear
“Only the federal capital Vienna was able to score as the only federal state with real growth of 0.4%, while the tourism strongholds of Tyrol and Salzburg at -0.5% and -0.7% respectively at least performed significantly better than the national average of -1.2%. Upper Austria (-2.7 percent) and Carinthia (-2.4 percent) were at the other end of the provincial scale, with their industries suffering particularly from the weak international demand,” says Robert Schwarz, economist at UniCredit Bank Austria. The development in Vorarlberg (-1.8 percent) and Lower Austria (-1.7 percent) was also below average. In Burgenland (-1 percent) and, somewhat surprisingly, in the industrial state of Styria (-0.8 percent), the decline in economic output in the previous year was somewhat weaker than the national average.
Industry and construction sector still in recession
The negative trend in industry continued in 2024. “With an Austria-wide decline in industrial production of over five percent, the industry was once again the economic brake,” says Schwarz. The situation was particularly tense in Upper Austria, Carinthia and Lower Austria. In Vienna and Tyrol, the pharmaceutical industry in particular proved to be a pillar of growth. The situation also remained challenging for the construction industry. “The subdued demand in residential construction due to high construction costs and higher interest rates had a massive impact on the construction industry,” adds Schwarz.
The weak global demand was reflected in the export statistics. Overall, Austrian exports of goods fell by almost 5% to EUR 191 billion in 2024. The sharpest slump was seen in Upper Austria, the most important export country, in the machinery, steel and automotive parts sectors. In Tyrol and Vienna, on the other hand, development was relatively robust due to the pharmaceutical industry.
Services sector with light and shade
The public sector, financial service providers, real estate and the information technology sector made a positive contribution to economic growth in most federal states in 2024. In tourism, there was an increase to 154.3 million overnight stays in the previous year, with Vienna in particular standing out with an increase in overnight stays of over 9 percent. Due to the sharp rise in costs, value added in this sector nevertheless fell, which was a major setback for the western federal states in particular. In all regions, economic output in trade and business-related services shrank in 2024, suffering above all from weak consumer sentiment and weak industrial activity.
Unemployment rate up everywhere
Unemployment rates rose in all federal states in the previous year compared to 2023. “The sharpest percentage increase in unemployment was in Upper Austria. The pressure was particularly high there in all cyclically sensitive sectors,” explains Bruckbauer. Salzburg once again recorded the lowest rate with an average of 4.2 percent. At 11.4 percent, Vienna had the highest unemployment rate, but also the strongest increase in employment.
Federal states affected to varying degrees by US tariffs
The punitive tariffs of 50 percent on all EU imports threatened by US President Trump in May would affect the economy in the federal states to varying degrees. Overall, the Austrian economy would shrink by around 0.6 percent in the event of US tariffs of 50 percent and around 25,000 jobs would be at risk. “The industrial regions of Upper Austria and Styria would be the hardest hit, with a tariff-related decline in economic output of over 1 percent each and over 7,000 jobs at risk,” emphasizes Schwarz. The effects on the regional economy in Carinthia and Burgenland are the least severe.
Mixed outlook for 2025
The economic outlook for the federal states remains subdued in 2025. After a difficult year overall in 2024, the economic challenges in the regions will continue. The federal states are still in recession or only experiencing a weak recovery. Vienna and Burgenland should achieve the highest growth at 0.4% each. They are benefiting from the continued robust development of the public sector. Upper Austria and Carinthia are also expected to shrink significantly in 2025 due to the problems of their leading companies. All federal states will see a further increase in the unemployment rate this year. The increase is particularly strong in Upper Austria, Styria and Salzburg.
Enquiries:
UniCredit Bank Austria Economics & Market Analysis Austria
Robert Schwarz, Tel. +43 (0) 50505 - 41974;
E-Mail: robert.schwarz@unicreditgroup.at