major macro economic indicators
|2018||2019||2020 (e)||2021 (f)|
|GDP growth (%)||2.4||1.4||-7.0||4.0|
|Inflation (yearly average, %)||2.1||1.5||1.2||1.5|
|Budget balance (% GDP)||0.2||0.7||-10.0||-5.0|
|Current account balance (% GDP)||2.3||2.8||2.0||2.5|
|Public debt (% GDP)||74.0||70.3||85.0||84.0|
(e): Estimate (f): Forecast
- Industrial and tertiary diversification; high added value
- Comfortable current account surplus
- More than 30% of energy sourced from renewable supplies
- Major tourist destination (11th in the world)
- High public expenditure on R&D (3% of GDP)
- Dependent on the German and Central/Eastern European economies
- Banking sector exposed to Central, Eastern, and South-Eastern European countries
- Multiple layers of power and administration (federal, Länder, municipalities)
Gradual recovery of growth
The Austrian economy entered a deep recession in 2020 because of COVID-19. The country, which has been affected by the pandemic since March, implemented strict lockdown measures to limit the health consequences, but these have impacted the economy. Like most European countries, Austria then faced the second wave in the autumn, further slowing economic growth in 2020. In 2021, the conditions for an economic recovery seem to be in place, but could again be disrupted. Indeed, the virus is continuing to circulate actively on the European continent and the possibility of a third wave remains. Thus, travel restrictions are expected to continue to weigh on the country in early 2021 and recovery is expected to be slow and gradual.
Austria has been mainly affected by the decline in household consumption, the driving force of its economy (52% of GDP), which has been considerably reduced because of the economic crisis that has led to an increase in unemployment (10% in 2020 compared to 7.4% in 2019) and a drop in income. In order to limit the impact on households, the government, supported by the ECB, has put in place a budget support plan amounting to 13% of GDP. In addition to aid allocated to the medical sector and businesses, the plan includes assistance for households, such as, for instance, deferring the payment of social security contributions and debt servicing, short-time work and the reduction from 25 to 20% of the first bracket of income tax, retroactive to January 2020. Part of this aid has been extended until March 2021, which is expected to stimulate household consumption this year. However, consumption will remain below its pre-crisis level due to a still high household savings rate. Households are expected to continue to consume cautiously.
Furthermore, Austria is affected by the decline in tourism receipts, which account for 15% of GDP. Indeed, lockdown measures and border closures during the second wave prolonged the mobility crisis and had a significant impact on winter tourism. The government has allocated significant financial assistance, especially since tourism is not expected to resume before the spring of 2021, as the virus is still circulating.
Investment (24% of GDP in 2019), hitherto dynamic in all segments, has reduced sharply in 2020 due to COVID-19, except for the public sector, as the budget plan includes a sum dedicated to the latter, mainly in the healthcare system, climate and digital segments. In 2021, investment is expected to resume, but only slightly for housing and research and development, with the public component maintaining its pace. FDI (2.4% of total investment) has also contracted because of COVID-19. In 2021, it is expected to remain low, as economic uncertainties will persist.
Decrease in the public deficit and maintenance of the current account surplus
The traditional public surplus turned into a deep deficit in 2020, following the increase in government spending to cope with the crisis in a context of declining revenues. Indeed, the recovery plan is consequent and concerns many actors and economic sectors in the country. In 2021, the deficit is expected to decline due to gradual fiscal adjustments but will remain substantial due to the extension of certain support measures. The decline in public debt has slowed sharply because of the deficit in 2020. Its reduction will resume in 2021.
The current account surplus shrank in 2020 as a result of the sharp decline in the services surplus linked to the decline in tourism. The trade surplus has changed little, since the significant decline in exports (mainly automotive, electrical and electronic equipment, steel, wood and paper, pharmaceuticals, machinery) was offset by the concomitant reduction in domestic demand and, thus, imports. Remittances from foreign workers continued to sustain the high deficit in secondary income, while the investment income balance remained in balance with an equivalent decline in the proceeds of Austrian investments abroad and foreign investments in the country. In 2021, the current account balance will be close to its pre-crisis level, due to the recovery of international trade, even if constrained by the moderate recovery of the main European partners and a partial recovery in tourism. Recurrent surpluses have given Austria an external credit position.
Coalition government between the ÖVP and the Green
Early elections were held in September 2019, following which the ÖVP, the conservative Christian Democratic Party, once again became the largest party (37.5% of the vote). It began negotiations to form a coalition with the Greens, who came fourth. In January 2020, ÖVP and the Greens reached an agreement to form a coalition government. They have 71 and 26 seats out of 183 in the Nationalrat (Lower House), respectively. Mr Kurz, leader of the ÖVP, remained Chancellor. The two parties are very disparate and are likely to make compromises, particularly on immigration and climate. Kurz's options were limited because the other two major parties, the Social Democratic Party (SPÖ) and the nationalist FPÖ, had withdrawn from the preliminary talks and regional governors belonging to the ÖVP, which has significant influence in that party, supported an ÖVP-Green partnership. However, the inexperience of the Green ministers and the significant influence of the ÖVP could hamper the effectiveness of the government.
Last updated: February 2021
SWIFT and SEPA (within the EU) transfers are commonly used for domestic and international transactions and offer a cost-effective, quick, and secure means of payment.
Bills of exchange and, to a lesser degree, cheques are most commonly used as a means of financing or payment guarantee. Nevertheless, neither are widely used nor recommended, as they are not always the most effective means of payment., bills of exchange must meet relatively restrictive mandatory criteria to be valid, which deters business people from using them. In parallel, cheques need not be backed by funds at the date of issue, but must be covered at the date of presentation. Banks normally return bad cheques to their issuers, who may also stop payment on their own without fear of criminal proceedings for misuse of this facility.
As a rule, the collection process begins with the debtor being sent a demand for payment by registered mail, reminding him of his obligation to pay the outstanding sum plus any default interest stipulated in the sales agreement or terms of sale.
Where there is no interest rate clause in the agreement, the rate of interest applicable semi-annually from August 1, 2002 is the Bank of Austria’s base rate, calculated by reference to the European Central Bank’s refinancing rate, marked up by eight percentage points.
For claims that are certain, liquid and uncontested, creditors may seek a fast-track court injunction (Mahnverfahren) from the district court via a pre-printed form. The competent district court for this type of fast-tract procedure expedites the requisite action for ordinary claims up to EUR 75,000 (previously EUR 30,000).
With this procedure, the judge will issue an injunction to pay the amount claimed plus the legal costs incurred. If the debtor does not appeal the injunction (Einspruch) within four weeks of service of the ruling, the order is enforceable relatively quickly.
A special procedure (Wechselmandatsverfahren) exists for unpaid bills of exchange under which the court immediately serves a writ ordering the debtor to settle within two weeks. However, should the debtor contest the claim, the case will be tried through the normal channels of court proceedings.
If the debtor has assets in other EU countries, the creditor may request the Vienna Commercial Court to issue a European Payment Order for undisputed debts, enforceable in all EU countries (except Denmark).
Where no settlement can be reached, or where a claim is contested, the last remaining alternative is to file an ordinary action (Klage) before the district court (Bezirksgericht) or the regional court (Landesgericht) depending on the claim amount or type of dispute. Defendants have four weeks to file their own arguments.
With regards to the regional courts, defendants are expected to put forward their own arguments in response to the summons, and are allowed four weeks to do so.
A separate commercial court (Handelsgericht) exists in the district of Vienna alone to hear commercial cases (commercial disputes, unfair competition lawsuits, insolvency petitions, etc.).
During the preliminary stage of proceedings, the parties must make written submissions of evidence and file their respective claims. The court then decides on the facts of the case presented to it, but does not investigate cases on its own initiative. At the main hearing, the judge examines the written evidence submitted and hears the parties’ arguments as well as witnesses’ testimonies. An enforcement order can usually be obtained in the first instance within about ten to twelve months. The Civil Procedure Code provides that the winning party at issue of the lawsuit is entitled to receive full compensation from the losing party of all necessary legal fees previously incurred.
Enforcement of a legal decision
A judgement becomes enforceable when it becomes final. If the debtor does not respect the court’s judgement, the court can issue an attachment order or a garnishment order. Alternatively, the court can seize and sell the debtor’s assets.
For foreign awards, circumstances may vary depending on the issuing country. For EU countries, the two main methods of enforcing an EU judgment are the European Enforcement Order or under the provisions of the Brussels I regulations. For non-EU countries, judgments are recognized and enforced provided that the issuing country is party to an international agreement with Austria.
Out-of Court proceedings
Out-of court restructuring efforts and negotiations are usually antecedent to insolvency proceedings. They constitute a means to obtain recapitalization loans in exchange for a secured creditor status.
A pre-requisite for a restructuring proceeding is that the debtor files for the opening and at the same time submits a restructuring plan. This proceeding is either self-administrated or administrated by an administration. For self-administrated restructuring, the debtor must file an application of self-administration complemented by qualified documents and a restructuring plan that provides a minimum quota of 30%.
Liquidation proceedings aim to equitably realise the various creditors’ rights. The proceedings are led by a trustee in bankruptcy which takes control of the business, sells the assets, and divides the proceeds among the creditors.
Retention of title
Similar to Germany, Retention of Title is a written clause in a contract, which states that the supplier will retain the ownership over the delivered goods until the buyer made full payment of the price. This usually takes one of three forms:
- simple retention: the supplier will retain the ownership over the goods supplied until full payment is made by the buyer;
- expanded retention: the retention is expanded to further sale of the subsequent goods; the buyer will assign the claims issued from the resale to a third party to the initial supplier;
- extended retention: the retention is extended to the goods processed into a new product, and the initial supplier remains the owner or the co‑owner up to the value of its delivery.