How the War in Ukraine Affects Austrian Businesses

PeopleEntrepreneurs ♦ Published: July 19, 2022; 09:06 ♦ (Vindobona)

Besides causing enormous humanitarian and political problems, the Russian invasion has also caused a chain reaction in the economy that has been felt worldwide. Austrian Institute of Economic Research (WIFO) published a survey that examines exactly these questions in order to determine how strongly Austrian companies feel the crisis impacts them and which sectors are most affected.

The majority of Austrian companies feel affected by the Ukraine crisis. / Picture: © Marina Tower Holding GmbH

In addition to enormous humanitarian and political problems, the Russian invasion of Ukraine also caused an economic chain reaction that is being felt internationally. In order to find out how strongly Austrian companies feel affected by the crisis and which sectors are particularly affected, the Austrian Institute of Economic Research (WIFO) published a survey in which they investigate these very questions.

In general, it can be said that the Ukraine war triggered a further increase in uncertainty following the COVID-19 pandemic and, at 55%, affected the majority of Austrian companies.

Particularly affected in this context were larger companies in all sectors with 73% and companies active in the production of material goods (67%). In most cases, rising energy and intermediate input prices are the decisive factor.

Companies affected by the Ukraine war have on average more pessimistic business situation expectations and expect to have to increase their sales prices more frequently. Directly affected companies from the manufacturing sector expect a slightly disproportionate reduction in their production due to the shortage of natural gas.

In addition to the increased uncertainty, the sharp rise in energy prices, especially for gas, as well as a further intensification of supply bottlenecks are particularly burdensome for companies. Although Ukraine's exports to Austria correspond to only 0.6% of Austria's total imports, Ukraine's exports in a few segments account for a large share of Austria's total imports (as of 2021).

The most important goods are iron ores, where Ukraine accounts for 41.2% of Austrian imports, veneer sheets of hardwood, where Ukraine accounts for around 53.9% of Austrian imports, and ignition cable sets (9.0% of Austrian imports of ignition cable sets).

Indirect effects of the war are mainly on commodity prices; Ukraine is an important exporter of wheat. However, it is hardly known how the business activities of Austrian companies have been affected by the Ukraine war due to supply bottlenecks, the loss of export markets or price effects.

What adverse effects do companies in Austria feel?

In the WIFO survey, the majority of companies reported "rising energy prices" as an important adverse effect: 53% of the companies that said they were affected by the Ukraine war reported that they were severely affected by rising energy prices.

The second most common constraint reported by companies that said they were affected by the war in Ukraine was rising input prices. Across all sectors, around 30% of firms reported being severely affected by rising input prices.

The third most reported constraint in the economy as a whole is supply problems from Ukraine, Belarus and Russia, as around 13% of companies reported that these supply problems are causing severe constraints.

WIFO Austrian Institute of Economic Research