## IMF Executive Board Concludes 2022 Article IV Consultation with Austria

_IMF News, September 2, 2022_

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## Bibliographic details
- Published: September 2, 2022

---

### Overview
- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Austria.
- The Austrian economy recovered robustly from the pandemic, with real GDP recovering by 4.8 percent in 2021.
- The recovery lags somewhat compared to peers, partially due to the strong concentration of the winter tourism and hospitality sectors in Austrian GDP.
- Austria is highly vulnerable to the fallout of Russia’s war in Ukraine because of:
  - high dependence on energy imports from Russia,
  - deep integration into global value chains,
  - large banking exposures.
- Growth is projected to decline significantly during 2022:H2 and 2023 due to impacts of the war and the related energy crisis.
- Over the medium term, annual growth is projected to recover to around 1¾ percent.
- Output will remain below the pre-crisis trend.
- Uncertainty is extraordinarily high with significant downside risks.

### Executive Board Assessment
- The war in Ukraine constitutes another shock to the economy and has caused downside risks to rise considerably.
- Economic policies should aim at cushioning the impact of war, building resilience, and boosting growth.
- Measures taken to address inflation concerns are temporary, but many are broad-based while some actions could undermine green transition efforts.
- Any additional support should allow full pass-through of international prices to consumers while providing more targeted and temporary transfers.
- Austria’s contingency planning for a gas supply disruption is welcome but more is needed to safeguard medium-to-long-term energy security, including:
  - providing incentives for conservation and fuel switching,
  - developing strategies to diversify gas supplies in coordination with EU partners,
  - accelerating domestic green energy production.
- The eco-social reform is an important step in the green transition. Protection of vulnerable households is critical, but IMF advises against increasing broad-based compensation above the medium-term neutrality objective.
- Personal income tax indexation will keep the labor tax wedge down and avoid an additional contractionary effect from higher inflation. However:
  - together with indexation of social benefits, the authorities now face significant rigidities in fiscal consolidation,
  - increased discretionary expenditure control will be required to achieve Austria’s deficit objectives.
- Additional spending should be targeted on increasing potential growth and promoting economic resilience, while safeguarding debt sustainability.
- Population aging will increase pension and health care costs while reducing contributions; reforms to address this increasing liability would be appropriate over the medium term.

### Financial Sector and Macroprudential Policy
- The banking sector has weathered the pandemic well, but risks related to the Ukraine war warrant cautious monitoring of asset quality and enhanced supervision.
- To address financial sector risks from residential real estate prices:
  - the plan to make binding the borrower-based measures is welcomed,
  - more should be done if the overvaluation pressures persist.
- Additional capital-based macroprudential measures, such as a sectoral systemic risk buffer calibrated to real-estate exposure, should be considered if vulnerabilities persist.

### Labor Market, Migration, and Skills
- Measures to reduce labor market mismatch and promote employment can alleviate Austria’s labor shortages, including:
  - re-skilling programs,
  - language training,
  - relocation assistance,
  - policies to boost old-age labor force participation.
- Measures to rapidly integrate refugees from Ukraine are welcome from both a humanitarian and economic perspective.

### Digital and Green Transitions
- Accelerating the digital transition will help boost productivity and raise Austria’s growth potential.
- Digital spending could contribute to the green transition by increasing:
  - work-from-home options,
  - online banking and commerce,
  which could lower transport needs, fossil fuel consumption, and greenhouse gas emissions.

### Key Statistics and Projections (Table 1: Austria: Selected Economic Indicators, 2019–23)
- Population (million): 8.9
- Per capita GDP: $53,285
- Quota (current; millions SDRs/% of total): 3,932 (0.8%)
- Literacy 1/: 100%
- Main products and exports: Diversified
- Poverty rate 2/: 13.9%
- Key exports markets: Germany, CESEE

- Output — Real GDP growth (%):
  - 2019: 1.5
  - 2020: -6.7
  - 2021: 4.8
  - 2022 (Proj.): 3.9
  - 2023 (Proj.): (blank in table)

- Employment — Unemployment (Harmonized) (%):
  - 2019: 5.4
  - 2020: 6.2
  - 2021: 4.5
  - 2022 (Proj.): 4.6

- Prices — Inflation (%):
  - 2019: 1.4
  - 2020: 2.8
  - 2021: 7.1
  - 2022 (Proj.): 3.7

- General Government Finances (% of GDP):
  - Revenue:
    - 2019: 49.2
    - 2020: 49.0
    - 2021: 50.1
    - 2022 (Proj.): 49.5
    - 2023 (Proj.): 49.3
  - Expenditure:
    - 2019: 48.6
    - 2020: 57.0
    - 2021: 56.0
    - 2022 (Proj.): 52.7
    - 2023 (Proj.): 51.0
  - Fiscal balance (% of GDP):
    - 2019: 0.6
    - 2020: -8.0
    - 2021: -5.9
    - 2022 (Proj.): -3.2
    - 2023 (Proj.): -1.7
  - Public debt (% of GDP):
    - 2019: 70.6
    - 2020: 83.9
    - 2021: 83.0
    - 2022 (Proj.): 79.4
    - 2023 (Proj.): 77.5

- Money and Credit:
  - Broad money (% change):
    - 2019: 9.5
    - 2020: 4.9
  - Credit to the private sector (% change) 3/:
    - 2019: 5.1
    - 2020: 7.0
    - 2021: 6.4
    - 2022 (Proj.): 3.3

- Balance of Payments:
  - Current account (% of GDP):
    - 2019: 2.1
    - 2020: 2.5
    - 2021: -0.5
    - 2022 (Proj.): -0.8
    - 2023 (Proj.): -1.0
  - FDI (% of GDP): 2.3 (year not specified in table)
  - Reserves (months of imports):
    - 2019: 1.2
    - 2020: 1.6
  - External debt (% of GDP):
    - 2019: 154.4
    - 2020: 164.9
    - 2021: 161.7
    - 2022 (Proj.): …

- Exchange Rates — REER (% change):
  - 2019: -1.1
  - 2020: -8.3
  - 2021: 8.4

Sources: Authorities; and staff estimates and projections.
1/ Percent of population aged 15–74 with education attainment between pre-primary and tertiary education.
2/ 2020, at risk of poverty rate after social transfers.
3/ Households and non-financial corporations. Exchange rate adjusted.

*IMF Communications Department, Press Release No. 22/296 (September 2, 2022).*

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## References

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_Source: https://www.imf.org/en/news/articles/2022/08/31/pr22296-austria-imf-executive-board-concludes-2022-article-iv-consultation-with-austria_