Presentation of the 2019 Economic Survey of Austria

2019 OECD ECONOMIC SURVEY OF AUSTRIA Investing in the Future Vienna, November, 13th 2019 http://www.oecd.org/economy/austria-economic-snapshot/

@OECDeconomy @OECD

Weak external demand drags down growth 2018

2019

2020

Gross domestic product

2.3

1.4

1.3

Private consumption

1.1

1.7

1.8

Gross fixed capital formation

3.9

2.9

1.5

Exports

5.6

2.1

0.6

Imports

4.4

2.2

1.2

Unemployment rate (%)

4.8

4.6

4.5

Consumer price index

2.1

1.6

1.7

Fiscal balance (% GDP)

0.1

0.1

0.2

Public debt (Maastricht, % of GDP)

73.8

72.1

70.8

Source: OECD Economic Outlook 2019 Issue 2 projections for Austria.

2

Average incomes are high GDP per capita USD PPP, current prices, 2018 90000 80000 70000 60000 50000 40000 30000 20000 10000 0

OECD

DEU

AUS

DNK

AUT

NLD

ISL

NOR

CHE

IRL

Source: OECD, National Accounts database.

3

Well being is high Well being country rankings Ranking from 1 (best) to 35, 2017 20% top performers

(23)

(23)

(21)

(20)

60% middle performers

(18)

(15)

(14)

(13)

(12)

Subjective well-being

Income and wealth

Job and earnings

(10)

(27)

Civic Work-life engagement balance

Education and skills

Housing

Health Environmental Social status quality network

Personal security

Source: OECD Better Life Index database.

4

6

5

-1 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2

The strong recovery has peaked Real GDP In %, year-on-year change

Austria Germany European Union OECD

4

3

2

1

0

Source: OECD Economic Outlook: Statistics and Projections database.

5

Economic growth has lifted employment Employment rate In %, 15-64 year olds 85

Austria

Denmark

Germany

Netherlands

Sweden

Switzerland

80 75 70

2017

2015

2013

2011

2009

2007

2005

2003

2001

60

1999

65

Source: OECD Economic Outlook: Statistics and Projections database.

6

Public finances are balanced General government balance % GDP 1

Headline balance

0

Structural balance (national definition)

-1 -2 -3 -4 -5 -6 -7

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

Source: OECD Economic Outlook: Statistics and Projections database.

7

Public debt is still relatively high Public debt In % of GDP, Maastricht definition 100 90

100

Austria

Denmark

Germany

Sweden

Netherlands

90

80

80

70

70

60

60

50

50

40

40

30

30

20

20

Source: OECD Economic Outlook: Statistics and Projections database.

8

House prices continue to rise Real house prices Index 2000 = 100

275

Austria

Canada

Denmark

Sweden

Spain

250 225 200 175 150 125 100 75

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Source: OECD Analytical Housing Prices database.

9

Bank capitalisation can be strengthened further Capital to assets ratio of banks In %, 2019Q1 or latest quarter

20 16 12 8

ISL

IRL

EST

USA

MEX

GRC

LVA

CHL

LUX

AUT

ESP

PRT

BEL

AUS

GBR

DNK

FRA

FIN

ITA

DEU

NLD

SWE

0

CAN

4

Source: IMF Financial Soundness Indicators database.

10

Macroeconomic and financial recommendations  Let automatic stabilisers operate and consider more active measures if the slowdown gets more severe  Continue to reduce the public debt ratio  Make the existing macro-prudential recommendations on mortgage lending compulsory  Ensure that banks of all sizes are robustly capitalised

11

PREPARING WORKERS FOR THE KNOWLEDGE ECONOMY

Demand for skills are changing Change in share of employment Percentage point change between 1995 and 2015 2019Q1 or latest quarter

20

Low skill

15

Middle skill

High skill

10 5 0 -5 -10

Source: OECD (2018), Job Creation and Local Economic Development 2018: preparing for the Future of Work.

JPN

USA

DEU

FIN

NLD

NOR

GBR

SWE

FRA

DNK

CHE

-20

AUT

-15

13

Digital skills shortages are sizeable Skill shortage in knowledge of computers and electronics Scaled between -1 and 1 (strongest) 2015 or latest 1.0 0.8 0.6 0.4 0.2

FIN

ITA

ESP

AUT

PRT

SVK

NLD

NOR

DNK

CZE

DEU

IRL

GRC

SWE

BEL

SVN

FRA

POL

CHE

HUN

-0.2

GBR

0.0

Source: OECD (2018), OECD Skills for Jobs Database.

14

Gender imbalances prevail Activity status of women by age, cohort population = 100, 2015 or latest year 100

70

70

70

60

60

60

60

50

50

50

50

40

40

40

40

30

30

30

30

20

20

20

20

10

10

10

10

0

0

15.19 20.24 25.29 30.34 35.39 40.44 45.49 50.54 55.59 60.64 65.69 70.74

0

70.74

0

65.69

70

60.64

80

55.59

80

50.54

80

45.49

80

40.44

90

35.39

90

30.34

Retired

90

25.29

Unpaid workers

100

90

20.24

Employed parttime

100

100

15.19

Employed fulltime

Sweden

Austria

Source: OECD Employment Outlook 2018.

15

Activating the skills of migrants Migrants overqualified for job % of highly educated

40

32

24

16

8

0

CHE

NLD

DNK

SWE

DEU

EU

OECD

AUT

Source: OECD/EU (2018), Settling In 2018: Indicators of Immigrant Integration.

16

Recommendations on jobs and skills  Involve employer organisations more directly in the design and administration od life-long learning programmes  Continue to attract high-skilled foreign workers and retain more foreign graduates of Austria universities  Make high quality child care and full-day schooling a legal entitlement in the entire country  Strengthen the German language opportunities and the labour force participation potential of migrant families

17

BOOSTING PRODUCTIVITY

Productivity growth has slowed down Labour productivity growth In %, average annual rate 2.5

2006-2018

1995-2006

1.5

0.5

-1.5

GRC LUX ITA NOR FIN AUT JPN CHE BEL GBR DEU NLD DNK HUN FRA SWE CAN PRT NZL CHL SVN ISR AUS USA ESP ISL CZE TUR KOR SVK

-0.5

Source: OECD Statistics and Projections database.

19

Service sectors lag behind Business service sectors Gross value added per hour worked, index 2010=100

2017

2015

80

2017

80

2015

90

2013

90

2011

100

2009

100

2007

110

Germany Netherlands

2013

120

110

2005

Austria Denmark

2011

120

Germany Netherlands

2009

Austria Denmark

130

2005

130

2007

Manufacturing sectors Gross value added per hour worked, index 2010=100

Source: OECD Productivity Statistics (database).

20

Austria lags behind in digitalisation Access to high-speed broadband In % of firms with at least 10 employees, 2017 90 75 60 45 30 15 0

AUT

DEU

NLD

SWE

DNK

Source: European Commission (2019).

21

Product market regulations remain too restrictive Index of product market regulations Index scale from least (0) to most restrictive (6), 2018 2.5

2.5

Austria

OECD

Least regulated

2.0

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

Barriers to Trade Admin. Burden on and Investment Start-ups

Involvement in Business Operations

Public Ownership Barriers in Service Simplification and & Network sectors Evaluation of Regulations

0.0

Source: OECD 2018 Product Market Regulation database, July.

22

Corporate financing is biased towards debt Debt-to-equity ratio Non-financial corporations, 2017 1.2 1.0 0.8 0.6 0.4

AUT

ITA

DEU

CAN

GBR

OECD

NOR

FIN

BEL

ESP

NLD

DNK

FRA

USA

SWE

0.0

CHE

0.2

Source: OECD Financial Dashboard.

23

Risk capital markets are underdeveloped Stock market capitalisation % of GDP, 2017 250 200 150 100

CHE

USA

SWE

CAN

DNK

NLD

GBR

FIN

ESP

FRA

BEL

OECD

NOR

DEU

ITA

0

AUT

50

Source: World Bank Development Indicators.

24

Business dynamism is low All enterprises in business economy In % of all enterprises

20

Entry rate

20

Exit rate

PRT

AUS

SVK

LVA

GBR

POL

DNK

SVN

HUN

EST

ESP

LUX

NLD

CZE

ITA

0

DEU

0

FRA

5

FIN

5

NOR

10

SWE

10

AUT

15

BEL

15

Source: OECD Structural and Demographic Business Statistics.

25

Ambitious structural reforms would boost productivity Estimated effect on average firm productivity In % 3.0

3.0 After 3 years

After 5 years

2.5

2.5

2.0

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

Regulatory barriers

Easing access to equity and Reducing barriers to digital Increasing e-government venture capital trade use

0.0

Source: OECD calculations based on Sorbe et al. (2019), “Digital Dividends: Policies to Harness the Productivity Potential of Digital Technologies�, OECD Economic Policy Papers, No. 26

26

Recommendations to boost productivity  Make the licensing system more open to competition without undermining the quality of services and the training and skill standards of workers  Liberalise market entry in rail transportation, road freight and the distribution of pharmaceuticals  Modify corporate taxes to reduce disincentive effects and the debt-bias  Identify and address the remaining shortages in the ecosystem for equity investments in forms of all sizes. Further draw on the completion of the Capital Market Union  Take up measures planned by the previous government to facilitate business transfers  Improve the evidence base on business transfers. Increase awareness on the importance of successful transmissions and help disseminate best practices

27

TACKLING ENVIRONMENT CHALLENGES

Energy intensity has not improved Energy intensity ktoe/USD (2010 PPP)

0.16 0.12 0.08

Austria

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

0.00

2000

0.04

OECD

Source: OECD Green Growth Indicators database.

29

Urban sprawl in Austria is excessive Average population density in urban areas Number of inhabitants per km2, 2014 5000

Maximum

Average

Minimum

4000 3000 2000 1000 0

AUT

DNK

DEU

SWE

Source: OECD (2018), Rethinking Urban Sprawl: Moving Towards Sustainable Cities.

CHE

30

Recommendations on the environment  Improve co-operation between Federal, Länder and municipal governments on joint urbanisation, housing, transportation and air quality plans.  Phase in additional measures if emission trajectories diverge from targets.  Raise and harmonise carbon prices across activities, along a predictable path supported by international co-operation.

31

NEED TO IMPROVE GOVERNMENT EFFECTIVENESS TO MANAGE SPENDING PRESSURES AND SUPPORT GROWTH

Population ageing will intensify Projected change in working age populations 2020=100, 15-64 year-olds, 2020-2050 115

115

Austria

Denmark

Germany

Netherlands

Sweden

Switzerland

110

110

105

105

100

100

95

95

90

90

85

85

80

80

2020

2025

2030

2035

2040

2045

2050

Source: United Nations (2018), World Population Database.

33

Ageing puts pressure on government spending Composition of total government spending In %, cyclically-adjusted, 1995 and 2014 Health, and sickness and disability (16.9)

Other primary expenditures (15.5) 14.8 Family and children, unemployment, and education (15.4) General government wages and intermediate consumption (17.9)

14.7

17.7

26.2 19.1

Old age and survivors (28.4)

7.5

Investment (5.9)

Source: Cournède, Fournier and Hoeller (2018), “Public finance structure and inclusive growth”, OECD Economic Policy Papers, No. 25.

34

There are risks to long-term public finance General government gross debt % of GDP, Maastricht definition, scenario analysis 140

140

Baseline

120

Ageing scenario

Accelerated growth scenario

120

100

100

80

80

60

60

40

40

20

20

0

2015

2020

2025

2030

2035

2040

2045

2050

2055

Source: Calculations based on OECD (2019), OECD Economic Outlook: Statistics and Projections (database).

2060

0

35

Recommendations to public sector  Ensure the long-term sustainability of the pensions system, e.g. by linking retirement age to life expectancy.  More closely align revenue raising and spending responsibilities of government levels.  Seek economies of scale in municipal governance through shared services or consolidation of government.  Implement high-quality independent government spending reviews to improve the quality and cost-efficiency of services.

36

For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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