Overview. Austrian Federal Provinces. Upturn in provinces thanks to a tailwind from Europe and the tax reform

Transcription

1 Overview Upturn in provinces thanks to a tailwind from Europe and the tax reform More favourable economic situation and fiscal boosts enabled almost all provinces to experience a higher growth rate in 2016 Vorarlberg and Burgenland led the way among the provinces in 2016 Strong industry brought important boosts for Vorarlberg, Carinthia and Burgenland Construction trend reversal supported Tyrol, Styria and Carinthia Services were the deciding force in 2016, particularly in Vienna, Salzburg and Burgenland In 2017, almost all provinces will experience an increase in growth rate: Strong domestic demand and more export momentum thanks to a global economic upwind will bring even chances of growth with more advantages for industrial heavyweights Unemployment rate to sink in all provinces in 2017: East- West divide as a result of different economic and migrationrelated factors Authors: Walter Pudschedl Robert Schwarz Imprint Published by UniCredit Bank Austria AG Economics & Market Analysis Austria Schottengasse Vienna Telephone +43 (0) Fax +43 (0) econresearch.austria@unicreditgroup.at May 2017 UniCredit Bank Austria Economics & Market Analysis Austria Page 2

2 In detail Vorarlberg and Burgenland take the top spot for growth in 2016 Strong industrial growth 2016 saw the economic recovery in Austria find a stable foothold. The increase in GDP rose from 1 percent in 2015 to percent in The revival of Austria s economy was caused to a significant extent by the tariff reform in wage and income tax which strengthened private consumption. Additionally, investments once again brought a boost as the existing investment backlog gave way to an improved sentiment and lasting favourable financial conditions. Thanks to the revitalisation of the international economy at the end of the year, foreign demand which until that point had been slow finally improved. The more favourable economic situation, in the Eurozone in particular, and the boost from the tax reform were reflected in higher growth rates in almost every province in 2016, compared to the previous year. Under these conditions, the services sector was the deciding force. While the construction economy was barely able to report positive results, the industry in some provinces expanded successfully, despite weak export demand overall. Under these conditions, all provinces apart from Lower Austria were able to achieve greater economic growth in 2016 than in The growth rate in the provinces was more even in 2016 than in recent years, as the services sector provided the deciding boost and the service strongholds were able to make up ground in comparison to the more industry-oriented provinces. The leaders of the dynamic ranking in Austria, with a positive result of 2.4 percent in 2016 were Vorarlberg and Burgenland two provinces which were able to achieve both dynamic services and strong industrial development. Additionally, Tyrol, Salzburg, Upper Austria and Styria displayed above-average dynamics. Bringing up the rear of the province rankings with an increase in economic performance that nonetheless reached 1.2 percent is Lower Austria the only province which was unable to turn a more favourable economic environment into an increase in growth compared with Domestic industry was able to continue the moderate growth rate from previous years in 2016, with an increase in gross value added by a real 1.1 percent, despite the uncertainty affecting the global situation. In the second half of the year, in particular, this resulted in challenges for some export-oriented sectors these obstacles prevented higher dynamism in an international environment which only started to improve at the turn of the year. The contribution of Austrian industry to growth was lower than average in In Vorarlberg, Carinthia, Burgenland, Upper Austria and Salzburg, however, favourable regional developments in export, as well as suitable sector structures, meant that industry was able to provide an above-average level of support. The only areas which saw this sector significantly lessen economic development were Lower Austria and Vienna. Economic growth in 2016 (Real change over previous year in %) Primary sector Industry Construction Services Total above average below average V B T S UA ST C VIE LA A Source: UniCredit Bank Austria Economics & Market Analysis Austria Regional growth outlook for 2017 (Real change over previous year in %) above average below average V T UA S ST B C VIE LA A Source: UniCredit Bank Austria Economics & Market Analysis Austria 1.8 UniCredit Bank Austria Economics & Market Analysis Austria Page 3 May 2017

3 Construction industry provides noticeable support for growth in just three provinces Services sector supports all provinces in 2016 Upturn in provinces continues into 2017 Highly varied effects due to Brexit and US trade restrictions Regional differences in the labour market due to the economy and an increase in supply The development of the construction economy in Austria in 2016 was once again restrained, although it began to take a turn for the better in the latter half of the year. Gross value added increased slightly for the first time since 2007 as the building construction sector, among others, benefited from residential construction initiatives. Despite this, the construction industry was only able to make a noticeable positive contribution to overall growth in Tyrol, Styria and Carinthia. In contrast, developments in construction in Burgenland with the comparatively largest construction sector of all the Austrian provinces limited economic dynamism to the greatest extent. After a hesitant upturn in previous years, the services sector was able to show real growth in Across the country, gross value added increased by a real percent. With a proportion of the entire value added in Austria of almost 70 percent, this sector also provided the most important contributor to growth. Overall, services formed the basis for almost three quarters of the economic growth across Austria on average. As the main beneficiary of the tax reform, the services sector is a significant force behind the upturn in Austria. Across all the provinces and in eastern Austria in particular services provided an added boost. The international economy has been gaining momentum since the end of The economic situation in many emerging markets is improving, and the European economy has now entered a strong phase of growth. Slightly stronger global demand will assist domestic export businesses more than in the previous year and will compensate for gradually diminishing tailwinds through consumption and investment. Economic growth in Austria will increase to 1.8 percent in While boosts to growth from foreign demand which primarily affect strong industrial provinces are sure to increase, the positive effects for the services sector will decrease as the tax reform is slowly phased out should see a better upturn for the construction industry, strengthened by residential construction initiatives in particular. The chances of growth in provinces which are more industry-oriented and the services strongholds will be balanced by the framework conditions which have been adopted though this may provide more advantages for the industrial heavyweights. Almost all provinces will be able to achieve an increase in their growth rate in 2017 against this more favourable economic background. In the west, we expect that Vorarlberg and Tyrol will be most successful, with economic growth of 2.4 percent. But even Vienna and Lower Austria, which are at the bottom of the table, are expected to see an increase in GDP of around percent. Potential economic risks posed by the United Kingdom s exit from the EU or trade restrictions in the USA would affect the Austrian provinces very differently, depending on their export situation and their bilateral economic relationships. Demand from the USA amounts to around 2.5 percent of Austrian added value; demand from the United Kingdom makes up around half of that amount. Salzburg and Upper Austria would be affected by US trade restrictions imposed by the Trump administration most strongly of all the provinces Brexit may affect Styria to a particularly great extent. In both cases, Burgenland is at the lowest economic risk across Austria. The economic revival in 2016 has had a positive effect on the labour market. For the first time since 2011, the unemployment rate in Austria has not increased but remained unchanged at 9.1 percent, thanks to a high increase in employment. In this context, seven provinces in total are actually showing a decrease in unemployment, to a great extent in some only Lower Austria and Vienna have seen a further increase in the unemployment rate in Our analysis shows that the regional differences in the Austrian labour market over the past five years are based on both economic and structural factors. The unemployment rate in Austria increased from 6.7 to an average of 9.1 percent between 2011 and As a rule, provinces with weaker economic development also experience a higher increase in their unemployment rate. A defined disparity between the east and west can be seen in Austria. In most provinces, the unemployment rate has increased to a greater extent than can be attributed to the economy, however. In Vienna, in particular, the rise in the unemployment rate between 2011 and 2016 was strongly based on structural elements due to the particularly high UniCredit Bank Austria Economics & Market Analysis Austria Page 4 May 2017

4 increase in labour supply. Between 2011 and 2016, the unemployment rate in Vienna increased by 4.4 percentage points (from 9.2 to 13.6 percent). Of this, 2.8 percentage points can be attributed to the weak economy over this time period. On average in Austria, the increase in unemployment rate of 2.4 percent over the past five years affects both Austrian nationals and foreign nationals to an equal extent. For Austrians, the increase in the unemployment rate is almost exclusively caused by economic factors there has been hardly any displacement on the labour market. But it s an entirely different story for foreign workers. In this case, economic elements only account for around three quarters of the increase. One quarter of the rise can be put down to the supply of labour. The increased labour supply on the Viennese labour market has had the greatest effect on foreign workers. Almost 40 percent of the increase in the unemployment rate can be attributed to this. The economic revival has been so strong over the last few months that all provinces have seen a reduction in their unemployment rate, regardless of the increasing labour supply. On a yearly average, Austria is seeing an average reduction in the unemployment rate compared to the previous year it has decreased from 9.1 to 8.7 percent. In 2017, the unemployment rate is set to decrease in all provinces for the first time. We expect to see particularly favourable developments in Styria, Carinthia and Burgenland. However, Salzburg will still have the lowest unemployment rate in Austria with 5.4 percent; Vienna will still have the highest, with 13.3 percent. UniCredit Bank Austria Economics & Market Analysis Austria Page 5 May 2017

5 Disclaimer and Imprint We invite you to visit the economic analyses on Bank Austria s website: under "Direct access Markets & Research - Analyses & Research" in the section "Economic Research Austria" or directly at If you would like to receive information on our most recent publications by , please subscribe to the newsletter Bank Austria EconomicNews on the website. If you have further questions, please send us an to econresearch.austria@unicreditgroup.at Disclaimer of liability: This publication is neither a marketing communication nor a financial analysis. It contains information on general economic data. Despite careful research and the use of reliable sources, we cannot assume any responsibility for the completeness, correctness, up-to-dateness and accuracy of information contained in this publication. The opinions of the authors do not necessarily reflect those of Bank Austria and those of the companies which have engaged the services of the authors. The information contained in this publication is not to be interpreted as an offer or invitation for the sale or purchase of securities of any kind. We reserve the right to modify the views expressed in this publication at any time without prior notification. This information should not be interpreted as a recommendation to buy or sell financial instruments, or as a solicitation of an offer to buy or sell financial instruments. This publication serves information purposes only and does not replace specific advice taking into account the investor s individual personal circumstances (e.g. risk tolerance, knowledge and experience, investment objectives and financial circumstances). Past performance is not a guide to future performance. The information in this publication contains assessments of short-term market developments. We have obtained value data and other information from sources which we deem reliable. Our information and assessments may change without notice." Imprint Disclosure according to Sections 24 and 25 of the Austrian Media Act (Mediengesetz - MedienG): Published by: UniCredit Bank Austria AG 1010 Vienna, Schottengasse 6 8, which is also the media owner. Business objective: credit institution pursuant to Section 1 (1) of the Austrian Banking Act (Bankwesengesetz) Persons authorised to act on behalf of the media owner (Management Board): Robert Zadrazil (Chairman of the Management Board), Romeo Collina (Deputy Chairman of the Management Board), Dieter Hengl, Gregor Hofstätter-Pobst, Jürgen Kullnigg, Doris Tomanek. Supervisory Board of the media owner: Erich Hampel (Chairman of the Supervisory Board), Ranieri De Marchis (Deputy Chairman of the Supervisory Board), Mirko D. Bianchi, Christine Buchinger, Paolo Cornetta, Massimiliano Fossati, Olivier Nessime Khayat, Adolf Lehner, Alfredo Meocci, Gianni Franco Papa, Mario Pramendorfer, Karl Samstag, Eveline Steinberger-Kern, Ernst Theimer, Barbara Titze, Wolfgang Trumler, Barbara Wiedernig. Interests held in the media owner pursuant to Section 25 of the Austrian Media Act: UniCredit S.p.A. holds % of the shares in the media owner (key details of the shareholder structure of UniCredit S.p.A. are available at Betriebsratsfonds des Betriebsrats der Angestellten der UniCredit Bank Austria AG, Region Wien (the Employees Council Fund of the Employees Council of employees of UniCredit Bank Austria AG in the Vienna area) and Privatstiftung zur Verwaltung von Anteilsrechten (a private foundation under Austrian law; founder: Anteilsverwaltung-Zentralsparkasse; beneficiary: WWTF Wiener Wissenschafts-, Forschungs- und Technologiefonds) have a combined interest of 0.005% in the media owner. UniCredit Bank Austria Economics & Market Analysis Austria Page 6 May 2017