Austria has a
well-developed social market economy with a high standard of living and
is closely tied to other EU economies, especially Germany's.
Until the late 1980s, the government and its state-owned industries
conglomerate played a very important role in the Austrian economy.
However, starting in the early 1990s and accelerating from 2000 to 2006,
state-owned firms began to operate largely as private businesses and the
government wholly or partially privatized many of these firms. Since
2006, the current "Grand Coalition" government has not reversed
privatizations but has also not undertaken any further privatization.
Following several years of solid foreign demand for Austrian exports and
record employment growth, the international financial crisis and global
economic downturn in 2008 led to a deep recession that persisted until
the third quarter of 2009. Austrian GDP contracted 3.5% in 2009, but it
will probably see positive growth of about 1% in 2010. Unemployment
remains considerably lower in Austria (5.5% in 2009, 6.0% projected for
2010) than elsewhere in Europe, partly because the Austrian Government
has subsidized reduced working hour schemes to allow companies to retain
employees. Such stabilization measures, stimulus initiatives, and the
government's income tax reforms pushed the budget deficit to about 4% of
GDP in 2009, from only about 1.3% in 2008.
Austria’s economy has benefited greatly from EU membership (since 1995);
the introduction of the Euro (in 2002); and particularly growing
commercial relations--especially in the banking and insurance
sectors--with central, eastern, and southeastern Europe, but it has made
these sectors vulnerable to financial instability. Some of Austria's
largest banks have required government support--including in two
instances, nationalization--to prevent insolvency and wider regional
contagion. In the medium term, all large Austrian banks will need
additional capital (like most sizable European banks). Even after the
global economic outlook improves, Austria will need to continue
restructuring, emphasizing knowledge-based sectors of the economy, and
encouraging greater labor flexibility and greater labor participation to
offset structural unemployment, Austria's aging population, and a low
Austria has a strong labor movement. The Austrian Trade Union Federation
(OGB) comprises constituent unions with a total membership of about 1.2
million--about 35% of the country's wage and salary earners. The OGB has
always pursued a moderate, consensus-oriented wage policy, cooperating
with industry, agriculture, and the government on a broad range of
social and economic issues in what is known as Austria's "social
partnership." Because of a scandal involving a bank the OGB owned, the
OGB lost much of its political influence and is still trying to recover.
Austrian farms, like those of other west European mountainous countries,
are small and fragmented, and production is relatively expensive. Since
Austria became a member of the EU in 1995, the Austrian agricultural
sector has been undergoing substantial reform under the EU's common
agricultural policy (CAP). Although Austrian farmers provide about 80%
of domestic food requirements, the contribution of agriculture,
forestry, and fisheries to gross domestic product (GDP) has consistently
declined over the last decades to just 1.7% (2008).
Trade with other EU-27 countries accounts for about 73% of Austrian
imports and exports (2009). Expanding trade and investment in the new EU
members of central and eastern Europe that joined the EU in May 2004 and
January 2007 represent a major pillar of Austrian economic policy.
Austrian firms have sizable investments there and continue to move
labor-intensive, low-tech production to these countries. About one-half
of Austria's foreign direct investment (FDI) is concentrated in the
countries of central, eastern, and southeastern Europe. Many western
European and international companies have located their central/eastern
European headquarters in Austria.
Total trade with the United States in 2009 reached $8.9 billion. Exports
from the United States to Austria amounted to $2.5 billion. U.S. imports
from Austria in 2009 were $6.4 billion. The United States is Austria's
seventh most important trade partner worldwide. Approximately 340 U.S.
firms hold investments in Austria. The stock of U.S. foreign direct
investment in Austria is an estimated $11.1 billion (2008), which
represents about 7% of FDI in Austria and makes the U.S. fourth among
foreign investors in Austria.