Austria: Economy hammered by Covid-19 in Q1, contracting at steep pace
In the first quarter of the year, the economy has been hard hit by the Covid-19 pandemic and subsequent containment measures paralyzing activity. GDP shrank 2.5% quarter-on-quarter in seasonally-adjusted terms, swinging from the 0.2% expansion in the prior quarter and largely in line with our panelists’ expectations. Moreover, the economy contracted 2.7% year-on-year in the quarter, contrasting the revised 0.9% expansion logged in the fourth quarter of last year (previously reported: +1.0% year-on-year). The first quarter data is, however, likely subject to revisions as only a limited set of indicators were available for March, when the lockdown was in full effect.
Private consumption fell 3.1% quarter-on-quarter (Q4: +0.3% quarter-on-quarter). As large parts of the economy were locked down, demand and supply evaporated, with the trade and services sectors particularly hard hit. Fixed investment fell 0.9% over the prior quarter (Q4: +0.4% qoq). On the other hand, government consumption growth accelerated from 0.4% in the fourth quarter to 0.6% in the first.
In light of dissipating domestic demand, imports of goods and services fell 2.3% quarter-on-quarter (Q4: +0.2% qoq). However, external demand also received a body blow due to the health crisis and lockdown measures: Exports of goods and services contracted 1.8%, swinging from the 0.1% expansion in the prior quarter.
This year, the economy is expected to shrink owing to a steep recession in the first half of the year on the back of the Covid-19 pandemic weighing on demand and supply, both domestically and globally—with the brunt of the downturn expected to be felt in the second quarter. On the other hand, government fiscal stimulus should soften the economic impact somewhat, while the gradual lifting of lockdown measures will provide some respite to the domestic economy.
Inga Fechner, Austria economist at ING, commented that: “The economic picture will not be pretty this year despite the easing of the lockdown measures [as of 1 May]. […] While the first quarter was bad, the second quarter will be worse, as economic and social life came to a standstill for almost four weeks and will only restart slowly.”