Austrian Economy

This is an achievement of which we can be proud. The remarkable development our country has gone through is evident especially when considering the starting situation which was far from favorable. For in this century marked by wars and human disasters it was not always easy for Austria to find its place in the world.

At the beginning of the 20^th century, the Austro-Hungarian monarchy was a multinational state dominated by the agricultural sector and characterized by a strong economic specialization in the Crown lands. In 1918, Austria's national territory was reduced to its current size, and in the 1920s, the Austrian government succeeded in stabilizing the country's economic situation. However, the world economic crisis also hit Austria and led to mass unemployment and hyper-inflation.

After World War II, Austria made every effort to achieve swift reconstruction and since 1947 participated in the Marshall Plan. This also laid the foundations for the country's economic system. After it was liberated in 1955 and re-gained its sovereignty, Austria quickly embarked on a course of internationalization and became a member of the United Nations in the very same year.

In 1960, Austria joined the European Free Trade Association (EFTA) and thus implemented the first steps towards integration. In 1972 the interim agreement, and in 1973 the Free Trade Agreement between Austria and the EEC entered into force. The following years saw a rapid growth of Austria's foreign trade with the EEC countries. Between 1980 and 1990 alone, Austria's foreign trade with the European Community increased by 12% and this accounted for nearly 2/3 of its total foreign trade. At the same time, foreign trade with the Eastern European countries has continually declined in significance since 1975. In 1989, the share of Austria's foreign trade with Eastern European countries amounted to a mere 9.9% for exports and 6.8% for imports.

In 1989, Austria applied for membership in the European Union. In a referendum held on June 12, 1994, the overwhelming majority of Austrians voted for EU accession. Austria acceded to the European Union on January 1, 1995.

Hence, at the beginning of the 21st century, Austria is a member of a union which is the most important global player on the world economic scene. After all, the European Union produces 31% of all goods manufactured world-wide, has the largest share in world trade and has a gross domestic product corresponding to nearly 40% of that of all OECD member states.

As an EU Member State, Austria obtained free access to the Single Market with 371 million inhabitants, and put Austrian enterprises on a level playing field with Europe. Since about two thirds of its exports are to the EU, Austria has gained considerable economic benefits from its accession to the EU. As revealed by the first comprehensive study after Austria's EU accession, which was carried out by the Austrian Institute of Economic Research, the overall welfare gains amount to 1 1/3% in the first four years. Labor productivity has also increased significantly. Furthermore EU accession had a positive impact on inflation and unemployment rates, although to a slightly lesser extent than had been expected.

Austria's membership in the EU and the growing globalization provided not only a stimulus to initiate long overdue structural improvement measures but also to design strategies to promote existing strengths. Future-oriented concepts for the establishment of new businesses, the reduction of red tape, the acceleration and simplification of administrative procedures opened up new opportunities for the Austrian economy. Without the external pressure, these reforms would not have been implemented or would have taken longer to accomplish.

As a result, Austria's attractiveness as a business location has significantly grown. Austria is one of the few business locations in the world which successfully combine good investment conditions and an extremely high quality of life. Austria has the third highest per-capita income in the EU, the third lowest unemployment rate, the second lowest inflation rate and an above-average economic growth.

Apart from the good fundamentals and the high degree of industrial peace, the opening-up of the former Eastern bloc was a decisive factor for heightening Austria's attractiveness as a business location, since the country moved from Europe's periphery to the center of a strongly growing continent. 10 years after the fall of the Iron Curtain, the Austrian Institute of Economic Research has evaluated the opening-up of Eastern Europe very positively: Austria's cumulative GDP, for example, rose by 3.3%. Overall exports to Central and Eastern Europe tripled, and exports to our neighboring countries (Hungary, the Czech Republic and Slovakia) even increased 4.5-fold.

The volume of Austrian direct investments has also strongly expanded since the fall of the Iron Curtain. Since 1990, Austrian investments in Central and Eastern European countries have increased ten-fold. At the end of 1998, the volume of Austrian direct investments in Eastern European countries stood at ATS 63.1 billion.

Apart from Austria's accession to the EU, the 'nineties were, in essence, characterized by the upswing in foreign trade with Eastern European countries. The degree of economic integration in some sectors even exceeds the figures achieved during the Austro-Hungarian monarchy.

EU accession and the pressure of globalization prompted Austria in the last decade of the 20^th century to take important steps towards stepping up its efficiency and modernizing its economy. Determination to stay on this path will be of decisive importance.

At the beginning of the 21^st century, Austria presents itself as a modern, confident EU Member State full of optimism for the future.

Note: The economy information  has been obtained in part from the official government site. www.austria.org  & the CIA Fact Book Online.

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