Austria: Economy rebounds strongly in Q2
July 30, 2021
A flash estimate of national accounts data for the second quarter showed that the economy rebounded strongly in quarter-on-quarter terms, expanding 4.3% and contrasting the 1.1% contraction logged in the prior quarter. Moreover, GDP rose 11.4% year-on-year in Q2, swinging from the 4.5% decline recorded in Q1.
On the domestic front, the bounce-back reflected stronger consumption. Household spending grew 3.8% over the prior quarter (Q1: -3.5% qoq) as consumers opened their wallets and started to venture outside their homes amid the gradual relaxation of restrictive measures from 19 May. Fixed investment growth, meanwhile, remained healthy but eased to 2.1% from 3.3% in the first quarter. Government consumption grew a softer 0.2% over the prior quarter in Q2, down from the 1.0% expansion logged in Q1.
Turning to the external sector, exports of goods and services jumped 14.9% quarter-on-quarter (Q1: -7.0% qoq) as the easing of travel restrictions abroad and the reopening of the hotels and restaurants sector boosted inbound tourism. Merchandise trade also benefited from gradually normalizing global economic conditions. Imports of goods and services expanded 9.8%, swinging from the 1.0% contraction logged in the first quarter. All in all, the external sector contributed positively to economic growth in Q2.
A second GDP estimate based on more complete data will be released at the end of August.
Looking ahead, the economy is expected to grow at a more moderate pace in the second half of the year, partly on the back of a less favorable base effect. The easing of movement restrictions will continue to support private consumption, while capital expenditure should continue growing healthily amid more upbeat business confidence. The relaxation of domestic containment measures, in conjunction with softer restrictions abroad, should also buoy the tourism sector as well as foreign trade. That said, risks are skewed to the downside due to lingering uncertainty over the course of the pandemic amid the spread of more infectious strains of Covid-19, while an expected pickup in unemployment as fiscal measures are gradually rolled back will cap household spending.
Analysts at the EIU added:
“We expect real GDP growth of 3.4% in 2021, driven mostly by exports and private consumption. Several structural factors will support growth in Austria in the rest of the forecast period. Strong political and social institutions, a solid budgetary policy, a diversified and export-oriented economy, and the only moderate indebtedness of the private sector are all factors that will help the recovery. Nevertheless, output will not return to its 2019 level until 2022.”
Author: Jan Lammersen, Economist