How the USA Assesses the Austrian Economy
Every year, the United States government publishes a report that informs US companies and investors about the business climate in more than 160 countries and economies, including Austria. In this US State Department report, business officials at embassies and missions around the world prepare and analyse a variety of economies that are or could be markets for US companies of all sizes. Read on if you want to know how the US views the Austrian economy!
The business representatives of the US Embassy attest to Austria's well-developed market economy. / Picture: © Wikimedia Commons / Gugerell / CC0
Each year, the United States government publishes a report informing U.S. businesses and investors about the business climate of more than 160 countries and economies. In this U.S. Department of State report, business officials at embassies and missions around the world prepare and analyse a variety of economies that are or could be markets for U.S. businesses of all sizes.
This year's report, for example, also analyses Austria. The business representatives of the US Embassy attest to Austria's well-developed market economy, which welcomes direct investment and is particularly well-positioned in the areas of technology and R&D. The report also describes the country's economic development. Austria benefits from a skilled labour force and a high standard of living, with Vienna consistently ranking high in global quality of life rankings.
With more than 50 per cent of GDP generated by exports, Austria's economy is closely intertwined with other EU economies, especially Germany, its largest trading partner, it said.
The United States considers itself one of Austria's most important trading partners and ranks fifth in total trade, according to preliminary data from 2021. The economy is characterised by a large service sector and an advanced industrial sector specialising in high-value components, especially for vehicles. The agricultural sector is small but highly developed.
In a brief analysis of the COVID-19 impact on the Austrian economy, the US report noted that the virus hit Austria hard. The unexpected disaster led to a 6.7% drop in GDP in 2020, with the unemployment rate reaching a peak of 5.4% at the end of 2020. Nevertheless, a quick recovery was achieved in 2021.
US business leaders see a major risk in the outbreak of war in Ukraine. This lowers future growth forecasts and leads to problems on the labour market, which are largely due to a lack of qualified workers.
About 220 US companies have investments in Austria, represented by about 300 subsidiaries, and many have expanded their initial investments over time.
According to the Austrian National Bank, US direct investments in Austria amounted to about EUR 11.6 billion (USD 13.7 billion) in 2020, and US companies secure more than 16,500 jobs in Austria. Austria offers a stable and attractive climate for foreign investors.
What the report highlights as particularly positive about the investment climate in Austria is that there is a high degree of political stability, despite several new elections in recent years.
There is a comparatively harmonious relationship between employers and employees, which leads to low levels of strikes and labour unrest. The standard of the local labour force is also positively highlighted. Austrian workers are generally well educated and it is not difficult to fill highly qualified positions.
The high level of productivity and international competitiveness is conducive to US investment, and the excellent quality of life for workers and a high-quality infrastructure in the areas of health, telecommunications and energy should benefit expats from the USA.
However, negative aspects of the Austrian investment climate were also elaborated. For example, the tax burden in Austria is considered to be particularly high. The large public sector and a complex regulatory system with extensive bureaucracy are also seen as obstacles. The low level of innovation dynamics and the degree of digitalisation are also assessed negatively.
The industrial sectors of automotive, pharmaceuticals, ICT and electronics and finance are identified in the report as key factors that have attracted significant investments in Austria in the past.
Finally, the report addresses the key issues that could significantly determine future investments in Austria. On the one hand, US business representatives see a vehement risk that Austria could be one of the countries most affected by the sanctions against Russia due to its strong dependence on Russian natural gas and the third highest banking exposure to Russia among EU member states.
Russia's invasion of Ukraine and the sanctions are expected to lead to a 0.4-0.5% decline in Austrian GDP. However, the impact is likely to be greater if natural gas supplies are interrupted. Austria relies on Russian imports for about 80 % of its natural gas needs.
At the same time, Austria's export-oriented economy is particularly sensitive to events affecting trade, which could include possible pandemic setbacks, especially in the winter months.
The tourism sector, which together with the hotel and restaurant industry accounts for 15 per cent of the country's GDP, continues to face problems as it is currently only two-thirds of its pre-crisis production level. Many businesses are also struggling to find skilled labour, which is preventing the economy from reaching its full production potential.