After four years of disappointing growth, economic activity picked up in 2016. It has been supported by a fiscal reform that boosted household disposable income, a catch-up of investment and solid job creation, especially among elderly, women and immigrants. These factors will continue to support growth in 2017 and, to a lesser extent, in 2018.
Easing restrictive entry regulations in retail trade and liberal professions would improve labour market prospects, including for migrants, and intensify competition, innovation and growth. Further consolidation of banks would improve cost efficiency, but care would have to be taken to avoid reductions in competition and the creation of institutions that are too big to fail.
The fiscal stance is expansionary in 2016 owing to the tax reform and migrant-related spending, and is projected to be broadly neutral in 2017 and 2018. Past support for the banking sector has pushed up public debt and population ageing will entail fiscal costs. Nevertheless, the current low interest rate environment provides fiscal space that should be used to increase public expenditure on early child care and broadband infrastructure to better prepare Austria for the future.
Economic Survey of Austria (survey page)