Austria: Economy returns to growth in first quarter, but data highlights frail recovery
April 30, 2021
The Austrian economy escaped recession as it returned to growth in the opening quarter of this year, with GDP expanding 0.2% quarter-on-quarter (Q4 2020: -2.7% qoq). However, data showed the fragility of the rebound, with the pandemic continuing to impact activity. On an annual basis, output fell 2.7% in the first quarter, improving from the fourth quarter’s 5.9% drop.
The quarterly bounce-back came solely on the back of stronger growth in fixed investment, which expanded 1.7% over the prior quarter (Q4 2020: +0.4% qoq). Greater capital expenditure was likely supported by recovering activity in the industrial and construction sectors. On the other hand, private consumption contracted again in the quarter, albeit at a much-reduced speed (Q1 2021: -0.2% qoq; Q4 2020: -5.2% qoq), with ongoing restrictions until early February weighing on household spending. Meanwhile, public consumption swung from a 1.6% quarter-on-quarter expansion in Q4 last year to a 0.3% contraction in Q1.
On the external front, pandemic-related movement restrictions weighed on exports, as the country is a popular destination for winter holidays. Exports of goods and services fell 1.0% over the prior quarter in Q1, down from the 0.2% drop in Q4. Imports of goods and services highlighted weak domestic demand, decreasing 1.5% quarter-on-quarter after expanding 2.1% in the final quarter of last year.
Looking at 2021 as a whole, the economy is forecast to return to growth on the back of strengthening foreign and domestic demand, particularly from the second half of the year as the vaccination campaign progresses. However, downside risks cloud the outlook. A slower-than-anticipated vaccine rollout could derail the recovery in aggregate demand, while uncertainty remains over the evolution of the pandemic amid the emergence of new strains of the virus. Moreover, an expected pickup in unemployment and an elevated household savings rate could dent private consumption and weigh on the overall economy.
At the end of May, the statistical office will release a second reading of national accounts data based on more complete information.
Author: Jan Lammersen, Economist