Austria: Economy enters double dip recession in Q1
A second reading of national accounts data revealed that the economy entered a double dip recession in the opening quarter of 2021. The economy contracted 1.1% on a seasonally-adjusted quarter-on-quarter basis, contrasting the previously estimated 0.2% expansion. However, the downturn softened from the prior quarter’s 3.1% tumble. On an annual basis, GDP contracted 5.5% (previously reported: -2.7% yoy), up marginally from the fourth quarter’s 5.6% drop.
The downturn reflected a pronounced 3.6% quarterly contraction in private consumption as lockdown measures in place until early February impacted consumers’ ability to spend. Public consumption, meanwhile, grew at a softer pace of 1.0% in the first quarter, following the fourth quarter’s 1.4% expansion. On the other hand, capital expenditure swung from a 0.3% contraction in Q4 2020 to a 3.3% expansion in Q1, likely supported by recovering activity in the industrial and construction sectors.
On the external front, exports of goods and services tumbled 6.5% over the prior quarter in Q1 (Q4 2020: -1.3% s.a. qoq). Austria is a popular European winter holiday destination, and movement restrictions weighed on exports as a consequence. In the winter season that ran from November 2020 to April 2021, there was a drop of over 90% in overnight stays. Meanwhile, imports of goods and services highlighted still-frail domestic demand, falling 1.0% in the quarter and contrasting the 2.0% expansion recorded in the previous period.
The economy is, however, forecast to return to growth this year as remaining restrictions to curb the spread of the coronavirus are gradually lifted amid an accelerating vaccine rollout. This should firm domestic and foreign demand, particularly in the second half of the year. However, risks are skewed to the downside amid lingering uncertainty over the course of the pandemic and the impact of new virus mutations. An expected pickup in the unemployment rate as fiscal support measures are gradually rolled back, as well as an elevated household savings rate, will weigh on private consumption.