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Leitl: “Growth Must Not Mean Less Reforms”

Published: March 28, 2014; 12:35 · (Vindobona)

Economic growth is now weaker than in the previous phases of upturn.

Leitl: "Investments for the future are indispensible." / Picture: © Wirtschaftskammer Österreich

On the occasion of the publishing of the economic prognosis by both Wifo (Austrian Institute of Economic Research) and IHS (Austrian Institute of Higher Studies), Christoph Leitl, President of the Austrian Chamber of Commerce (WKO) presented himself cautiously optimistic: “The prognoses confirm a slow recovery of the economy. Analysts already forecast a significant increase of growth in the coming year. This proves that despite of the required budget consolidation further efforts for growth are necessary.”

The institutes expect economic growth of 1.7 percent this year in Austria which is significantly below the growth rates of the previous phases of economic upturn. While Wifo expects growth of 1.7 percent in 2015 IHS forecasts higher growth rates of around 2.0 percent. Over the year, all growth components ‑ exports, investments and consumption ‑ are expected to gain in momentum. The upturn is based on exports, which are expected to see a phase of investments after a phase of of restrained investments. Moreover, the research institutes anticipate an increase of gross fixed capital formation by almost 3 percent this year. Wifo expects a slight decrease to 2 percent next year.

The level of investment is significantly lower than in the phases of upturn in the past. Investments are part of a catching-up effect and mainly replacement investments. This shows how important the trust of enterprises in stable framework conditions is and business development is,” according to Leitl.

The president of the Austrian Chamber of Commerce highlights the continuing increase in employment. “In spite the moderate growth the Austrian enterprises have continued to expand employment in the past year,” he noted.

“Slightly more growth must not mean a decrease in reforms,” Leitl stressed. “Investments for the future in eduation, research and development are indispensible for Austria’s competitiveness and the securing of long-term growth potential. At the same time the increase in expenses in the areas administration, pension and healthcare must be decreased,” Leitl concluded.

The Austrian economy, according to Wifo, is expected to growth by 1.7 percent in 2014 and by 2.0 percent 2015, which is still too low to reduce the high unemployment rate. While the inflation rate is declining it is still high compared to other countries in the European Union. Price increases are expected to be not as high both in 2014 and 2015. The consumper price index (CPI) is expected to increase by 1.8 percent in 2014 and by 1.9 percent in 2015, according to Wifi, and according to IHS by 1.9 percent this year. Last year the inflation rate came at 2.0 percent. The costs of the downsizing of Hypo Group will result in the budget deficit quota to increase by one percentage point to around three percent of GDP. However, as soon as 2015 the deficit is expected to decrease significantly to 1.2 or 1.4 percent of economic performance.