A city on a lake in Austria

Austria GDP Q4 2021

Austria: Lockdown pushes economy into contraction in Q4

Austria’s economy contracted 2.2% quarter-on-quarter in the fourth quarter of last year, ending the year on a sour note amid a new lockdown. The reading swung from the third quarter’s 3.8% sequential expansion. On an annual basis, the economy expanded 5.4% in the fourth quarter, slightly down from the third quarter’s 5.6% growth rate.

The quarterly drop came on the back of contracting household spending due to the reinstatement of lockdown measures, which limited consumers’ abilities to spend. Private consumption fell 1.4% over the prior period, contrasting the 7.0% expansion recorded in the third quarter, despite a further tightening of the labor market. On the other hand, fixed investment swung from a 2.8% contraction in the third quarter to a 0.4% expansion in the fourth, and public consumption grew 0.2% in the period, though it was down from the third quarter’s 0.5% increase.

Looking at the external sector, easing momentum in the industrial sector and weakened inflows of tourists weighed on trade. Exports of goods and services fell by 1.2% over the prior period in the fourth quarter (Q3: -2.3% qoq), and visitor arrivals during the country’s winter tourism season remained markedly downbeat compared to pre-pandemic levels. Imports of goods and services also declined 1.2% quarter-on-quarter (Q3: -2.1% qoq).

Looking ahead, the Austrian economy should regain momentum in the first quarter of 2022 after the lifting of restrictions for unvaccinated people in late January; restrictions for vaccinated people were lifted in mid-December. Household spending is set to firm amid a tighter labor market and modest wage growth, although consumption growth will be partly driven by a favorable base effect as the pandemic continued to depress spending last year. Excess savings will further support household spending this year. The fading impact of supply-side constraints should support the industrial sector and exports in turn as Austria’s manufacturing sector is highly integrated into German goods production processes.

Analysts at the EIU, however, offered a more reserved outlook for Austria:

“With international tourism playing such an important role in the Austrian economy, GDP growth in 2022 will continue to be affected by the pandemic. Visitors for the 2021-22 winter ski season will remain well below pre-crisis levels because of the recent spike in cases due to the Omicron variant, which will hurt growth during the first quarter of the year.”

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