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The economy is contracting 7.1 percent this year. Debt goes up, but interest payments go down. Economic growth in 2021 will be weaker than the latest forecast. Tourism is particularly affected by the second blockade.
Vienna
Austria’s economy will contract 7.1 percent this year, the National Bank predicts. The second lockout ruined the summer recovery. But at least the economy will be hit in the fall for half as much as it was in the spring, OeNB Governor Robert Holzmann and chief economist Doris Ritzberger-Grünwald told reporters on Friday. In the spring, the economy collapsed 25 percent, now 13 percent. In summer it was almost normal.
“Despite all the recessions, Austria weathered the crisis much better than other countries,” Holzmann said. Only “a few” countries, such as Germany, did better, but the crisis is not over.
According to Ritzberger-Grünwald, the fact that the crisis has a minor impact on the second blockade is due to the “learning effect” of the Austrians, on the one hand, and the lower level of uncertainty, on the other. Because now medical solutions were emerging.
While the OeNB’s forecast for 2020 is now a bit more optimistic than in June, the forecast for 2021 is now worse. The rebound in the next year should be just 3.6 percent instead of 4.0 percent. “In the first quarter of 2021 and, to a lesser extent, in the second quarter of 2021, economic activity inside and outside Austria will continue to be affected by the pandemic,” the National Bank said.
However, Ritzberger-Grünwald is optimistic that things can get back up quickly, if there is no third lock. “Given the positive experience after the first lockdown, I am confident that we will rise again relatively quickly” with economic performance measured weekly. However, it must be taken into account that the failure of winter tourism leaves a much stronger footprint on the national economy than hotel closures in spring or summer because the added value is greater between Christmas and Easter.
With massive economic aid, domestic politics ensured that the pandemic’s skid marks on the labor market were much less pronounced than the economic decline. The hours worked by the self-employed have fallen 8.8 percent this year, but jobs have only fallen 2.3 percent.
However, Covid-19 relief measures are causing the budget deficit to rise to 9.2 percent of GDP this year. Subsidies to the economy contribute around six percentage points, the rest is due to economic effects. The national debt will increase to 83.3 percent of GDP this year and 86.4 percent in 2021. In view of negative interest rates, this is currently not a burden on the state budget; the change in interest payments is currently even reducing the budget deficit.
The fact that Austrians have greatly reduced their consumer spending and put a lot of money on the high edge also has a strong influence on economic development. The savings rate rose from 8.2 to 13.7 percent. The National Bank considers half of this increase as “mandatory savings,” where consumers were unable to spend their money due to store closures or a lack of travel options. This money should flow into consumption again next year, so a 3.9 percent growth in consumption can be expected despite stagnant real income.
56 million fewer overnight stays
Tourism is particularly affected by the second blockade. Tourism has suffered from the crown crisis like almost no other industry. For this year, the economic research institute (Wifo) expects a decrease in overnight stays of 56.1 million or 37 percent compared to the previous year. It is also uncertain how the 2020/21 winter season will play out, as it depends on the infection rate at home and abroad.
“Above all, the absence of important German guests in early 2021 as a result of an ongoing travel advisory for Austria would have a significant negative impact on the balance sheet throughout the winter of 2020/21,” writes Wifo economist Oliver Fritz .
For the season, a drop in overnight stays of up to 70 percent compared to the previous 2019/20 season, which was already influenced by the crown crisis towards the end, would be conceivable. “This value is based on a 44 percent decrease in overnight stays by domestic guests and a 78 percent decrease in overnight stays in demand from abroad.”
Fritz assumes that the existing travel advisories for Austria will remain in effect in January and February and that foreign demand will only start to pick up again in the off-season. For domestic demand, too, it’s only assuming a faltering start to the season following the reopening of the hotel industry in the second week of January.
For the current 2020/21 winter season, the outlook is quite bleak. The review for the last summer semester is also weak. Across Austria, tourist overnight stays fell by around a third (31.8 percent) in the May-October period compared to the same period last year, and nominal revenues fell 30.5 percent to 10.10 one billion euros. From a regional perspective, according to Wifo, “due to its high dependence on international markets and air traffic restrictions”, Vienna was particularly affected. In the federal capital, overnight stays fell 80.9 percent.
Lower Austria also suffered notably with a fall in overnight stays of 36.1 percent. Federal states with active lakes or sports and a dominant proportion of inland travelers, including Carinthia (minus 11 percent), Burgenland (minus 12.6 percent) and Styria (minus 13.3 percent), posted significantly lower losses .
The crown crisis also changed people’s travel behavior in the summer season, Wifo also writes. The change of location and accommodation during a trip has clearly decreased. The average stay in national lodging establishments was 3.66 nights, 18.6 percent more than in 2019. One of the reasons for this evolution was that long-distance travelers only stayed briefly in the country, according to the analysis.
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