Subchapters:
- Basic data
- Public finances and the state budget
- Banking system
- Tax system
Basic data
The Austrian economy is a developed social market economy with a stable financial sector and close international ties. The service sector has a share of approx. 70%, while industry has a – long-term constant – share of less than 30%. Within services, tourism is of great importance. The tax burden is above average within EU countries, but the country is characterized by a high quality of life and a very good level of social security. Check ebizdir for economical facts of Austria.
In 2021, the Austrian economy recovered much faster and stronger than expected after the severe drop in GDP due to the coronavirus pandemic. However, this recovery has been uneven across sectors. While industry, trade and construction contributed significantly to growth, the hotel and catering industry remained well below pre-crisis levels. For the entire year 2021, Austrian GDP recorded a real growth of 4.5%. From the beginning of 2022, accommodation and catering services are once again experiencing dynamic growth and now contribute significantly to GDP growth. However, they will not reach their pre-crisis level even in 2023. The reason is, among other things, the war in Ukraine, which negatively affects tourists from non-European countries in particular. The Russo-Ukrainian war and the sanctions imposed on Russia have significant consequences for the overall Austrian economy and are slowing its growth. Uncertainty about future developments has the effect of further increasing prices for raw materials and energy, export shortfalls and supply chain problems are deepening. The average inflation rate in Austria for 2021 was 2.8% and was thus almost twice as high as in the previous two years. In April 2022, inflation reached a record 7.2% due to the crisis in Ukraine. The Austrian labor market quickly recovered from the problems caused by the Covid-19 pandemic, and by the end of 2021 it recorded a record number of approx. 100,000. vacancies, but also a lack of manpower, especially in health care and gastronomy. The problem remains the employment of the long-term unemployed on the labor market. The level of public debt reached EUR 33 billion at the end of the year, the ratio of Austrian public debt to GDP was 82.8%.
Austria is among the most economically developed countries in the world and has an open and highly export-oriented economy. The vast majority of Austrian exporters are small and medium-sized enterprises, every second job is directly or indirectly dependent on exports. The most important foreign trade commodities are machinery and vehicles, both on the export and import side. Other important export products include chemical products, iron and steel, food and beverages, and pharmaceutical products are also among the imported products. Germany remains the most important trade partner for Austria in the long term.
| Pointer | 2019 | 2020 | 2021 | 2022 | 2023 |
| GDP growth (%) | 1.5 | -6.7 | 4.5 | 3.9 | 2.0 |
| GDP/population (USD/PPP) | 61,994.70 | 57,182.30 | 62 155.10 | 66,680.00 | 70 160.0 |
| Inflation (%) | 1.5 | 1.4 | 2.8 | 5.6 | 2.9 |
| Unemployment (%) | 4.8 | 6.1 | 6.2 | 4.6 | 4.5 |
| Export of goods (billion USD) | 178.7 | 164.7 | 235 | 255.2 | 261.7 |
| Import of goods (billion USD) | 184.7 | 169.2 | 232.4 | 254 | 260.1 |
| Trade Balance (Billion USD) | 3.3 | 3.5 | 10.9 | 10.5 | 11 |
| Industrial production (% change) | 0.5 | -6.9 | 9.8 | 3.9 | 2.2 |
| Population (millions) | 8,9 | 8,9 | 8,9 | 9.0 | 9.0 |
| Competitiveness | 19/63 | 16/63 | 19/64 | ON | ON |
| OECD export risk | ON | ON | ON | ON | ON |
Source: EIU, OECD, IMD, WIFO, OeNB
Public finance and state budget
| Public finance | 2021 |
| State budget balance (% of GDP) | -5.9 |
| Public debt (% of GDP) | 82.8 |
| Current account balance (billion USD) | -2.2 |
| Taxes | 2022 |
| AFTER | 25% |
| F.O | 20-55% |
| VAT | 20%, 13%, 10% |
The year 2021 was marked by economic recovery, and since then Austria’s fiscal position has been continuously improving. As a result of the return of the Austrian economy to economic growth, the Maastricht balance should be below the set limit of -3.0% again in 2022. According to forecasts, the total public debt-to-GDP ratio will be around 81.1% in 2022, a decrease compared to the previous year. Nevertheless, the state budget faces uncertainties regarding further epidemiological developments and possible new measures. For 2022, €billion is earmarked for costs related to the coronavirus pandemic, compared to €1billion in 2021. Budget priorities include climate protection, mobility, digitization, research and development. The eco-social tax reform approved in January 2022 became a central element in budget planning for the years 2022 to 2025.
The budget deficit amounted to approximately EUR 2billion in 2021 (5.9% of GDP). State expenditures increased by EUR 9.4 billion (4.4%) and state revenues by EUR 1billion (8.7%) compared to 2020. The level of public debt reached EUR 33billion as of December 31, 2021, so the government debt was EUR 18.1 billion higher than in the previous year. The ratio of total Austrian public debt (state, federal states, municipalities, social insurance) to GDP was 82.8%. Economic restrictions coupled with the global pandemic led to a current account deficit of €billion (-0.5% of GDP) after more than 20 years. The amount of foreign exchange reserves available to the Austrian National Bank (OeNB) in 2021 was approximately EUR 7.5 billion.
Banking system
The Austrian banking sector is of great economic importance due to its size, with total assets of over 250% of GDP. Austrian banks are divided into joint-stock banks, savings banks (Erste Bank group), regional mortgage banks, cooperative banks (Raiffeisen group), Volksbanken association and building societies.
The branch network of banks has been showing a downward trend for several years, but the reduction in the number of branches is no longer progressing so quickly. With assets of EUR 277.4 billion, Erste Group Bank AG was the largest bank in Austria in 2020. It is followed by Raiffeisen Bank International AG (EUR 16billion), UniCredit Bank Austria AG (EUR 118.5 billion), Bawag Group AG (EUR 5billion) and RLB OÖ AG (EUR 48.6 billion)..
The Austrian National Bank (OeNB, https://www.oenb.at) is responsible for the stability of the financial market and the management of currency reserves. It has the form of a joint-stock company, the owner of 100% of the share capital in the amount of EUR 12 million is the Republic of Austria. The supervisory authority of the banking sector is the FMA (Finanzmarktaufsichtsbehörde), to which FinTech companies are also subject. The FMA plans to introduce stricter capital requirements for property loans to prevent a property bubble.
Austrian banks managed the effects of Covid-19 well – after halving profits in 2020 (EUR billion), the OeNB predicts a record result of EUR billion for 2021. Interest rates on deposits in Austria have been at a low level for a long time, but from the beginning of 2022 interest rates on new fixed loans have increased significantly.
Tax system
Austria has a stable tax system and efficient financial administration. The total amount of taxes is above average, especially when it comes to labor taxation. Against the international trend, property is taxed low and the tax system has been undergoing a process of greening for some time. Austria has agreements with 40 countries around the world, including the Czech Republic, on the avoidance of double taxation, which are governed by the model of the OECD agreement.
Incomes of natural persons are subject to income tax (ESt). In case of permanent residence in Austria, all worldwide income is taxed. Foreign entities are subject to income tax only on parts of income, e.g. from business with an establishment or from capital assets. Unlimited tax liability applies after a stay in Austria longer than 6 months. In the case of employment, income tax is collected by deduction from wages. A transparent progressive tariff is used for reception. There are 6 tax rates according to the amount of taxable income:
- 0% (up to EUR 11 thousand),
- 20% (over 11 to 18 thousand EUR),
- 35% (over 18 to 31 thousand EUR),
- 42% (over 31 to 60 thousand EUR),
- 48% (above 60 to 90 thousand EUR),
- 50% (above 90 thousand to 1 million EUR),
- 55% (above EUR 1 million).
Company income is subject to corporate income tax (KöSt). Profit is taxed at a uniform tax rate of 25%. A capital company is a separate taxpayer, while the income of personal companies is taxed separately for each partner. Sales tax/value added tax (USt, MwSt.) has rates of 20%, 10% and in some cases 13%. Capital gains tax (KESt) amounts to 25% and is collected by deduction from capital gains. Tobacco products, alcohol products, beer, petroleum products and new cars are subject to excise duty. Business tax, property tax or inheritance tax is not collected.
The core of the eco-social tax reform approved in January 2022 is the charging of CO₂ emissions and the redistribution of the relevant income with a climate bonus. In mid-2022, there will be a gradual reduction in corporate income tax from 25% to 24% (2023) and 23% (2024). In the area of income tax, the income of natural persons is to be relieved by changing the 2nd and 3rd tariff levels.
