Austria Country Risk Report

Pre-Covid, Austria averaged +1.5% GDP growth, outperforming the Eurozone. In 2020, GDP fell by -6.5% as tourism collapsed, despite industrial resilience. This was followed by a strong rebound in 2021 and 2022, with growth of +5% and +5.4% respectively, driven by easing supply-chain pressures, robust consumption, a solid labor market and high household savings. However, in 2023, financial tightening, weak global demand and high inflationary pressures dampened private consumption, while uncertainty weighed on investments. This led to a recession in the Austrian economy, with a GDP contraction of -0.8%, characterized by a decline in manufacturing, while services remained stable. Austria has now seen a second consecutive year of recession, with real GDP declining by -1.1% in 2024. The downturn intensified in the second half of the year, characterized by a decline in investment and weak demand for capital goods and machinery. Exports to Germany, Austria's most important trading partner, have fallen significantly this year, reflecting a long-term trend. Many sectors will remain under pressure throughout 2025, testing their resilience. Looking ahead, a gradual recovery in EU economic activity is expected to support export demand and help Austria emerge from its prolonged recession by mid-2025. However, investment remains weak. This rebound will boost overall growth in 2025, with GDP forecast at +0.4%. A sustained return to growth is anticipated in 2026, driven by fiscal stimulus in Germany and the EU, as well as by a resumption of momentum in private consumption. Austria's economy is projected to expand by +1.1%.

This challenging environment also impacted corporate insolvencies. In 2024, Austria experienced a significant increase of +22% in insolvencies compared to the previous year, reaching peak levels. However, growth in insolvencies is expected to slow significantly in 2025, with a more modest year-on-year increase of +2%, before declining by -4% in 2026. Despite the recession, employment in Austria increased by +0.2% in 2024, driven by growth in the public services sector, while there was a decline in manufacturing and construction. Unemployment, which reached +6.4% in 2023, is predicted to peak at +7.3% in 2025 before falling to +7.1% in 2026.

The Austrian business environment proves strong: the country scores very well in regulatory quality, rule of law and control of corruption. In addition to its strategic location in Europe, and high-quality infrastructure, Austria offers a skilled workforce and robust legal framework.

In Austria's 2024 election, the far-right FPÖ won nearly one-third of the vote, gaining support from former ÖVP voters and encouraging non-voters to participate. However, they failed to form a coalition. Despite their victory, both the ÖVP and the SPÖ rejected the idea of cooperating with the FPÖ. After months of deadlock, Austria formed its first three-party government since World War II, led by Christian Stocker of the ÖVP and including the SPÖ and liberal NEOS. This new coalition brings to an end the country’s longest government-formation process. Austria will hold general elections again in 2029.