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Successfully investing in Austria

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last updated on 19 May 2021 | reading time approx. 4 minutes

 

 

 

How do you assess the current economic situation in Austria?

The Cov­id-19 pan­dem­ic hit Aus­tria’s eco­nomy re­l­at­ively hard com­pared to oth­er European coun­tries. This mani­fes­ted it­self in a de­cline in GDP of -6.6 per cent in 2020. One reas­on for this was and is that – at least in parts of Aus­tria – with short in­ter­rup­tions, a strict lock­down has been in ef­fect since mid-Novem­ber 2020. Tour­ism and most com­mer­cial en­ter­prises as well as leis­ure fa­cil­it­ies have closed and no cul­tur­al events are pos­sible. The de­vel­op­ment in the in­di­vidu­al sec­tors has dif­fer­en­ti­ated due to these meas­ures. While the mood in con­struc­tion is good and im­prov­ing in in­dustry, the sec­tors just de­scribed are un­der heavy strain. Private con­sump­tion con­tin­ues to suf­fer from these meas­ures, which were taken to con­tain the Cov­id-19 vir­us. The la­bour mar­ket has also been hit by the crisis, which is re­flec­ted in a high­er un­em­ploy­ment rate by Aus­tri­an stand­ards. A sharp in­crease in un­em­ploy­ment could only be pre­ven­ted by the suc­cess­ive ex­ten­sion of short-time work schemes.


Due to these eco­nom­ic cir­cum­stances, the sur­viv­al of many en­ter­prises, es­pe­cially those af­fected by of­fi­cial clos­ures, de­pends on eco­nom­ic aid at the mo­ment. To cush­ion the eco­nom­ic and so­cial con­sequences of the eco­nom­ic crisis, the fed­er­al gov­ern­ment has ad­op­ted a whole bou­quet of sup­port meas­ures. These range from loan guar­an­tees, tax de­fer­rals and the already men­tioned short-time work to fixed cost sub­sidies, loss com­pens­a­tion, turnover com­pens­a­tion and de­fault bo­nus to an in­vest­ment premi­um. In total, Aus­tria has paid out or ap­proved al­most 35 bio. Euros in Corona aid so far. This means that more than ten per cent of the GDP has been spent on or prom­ised for Cov­id aid meas­ures. In ad­di­tion to the sus­pen­sion of the ob­lig­a­tion to file for in­solv­ency, this massive eco­nom­ic aid is also re­spons­ible for the seem­ingly para­dox­ic­al de­cline in in­solv­en­cies by al­most 40 per cent due to the eco­nom­ic crisis. However, catch-up ef­fects can be ex­pec­ted here in the course of 2021.

The fur­ther eco­nom­ic de­vel­op­ment will strongly de­pend on the suc­cess of the con­tain­ment meas­ures. At present, eco­nom­ic growth of between 1.5 and 2.3 per cent is ex­pec­ted for 2021, de­pend­ing on the fur­ther dur­a­tion of the lock­down. As it looks at present, the Aus­tri­an eco­nomy will only really get go­ing again after the suc­cess­ful con­clu­sion of the vac­cin­a­tion cam­paign that star­ted at the be­gin­ning of the year. However, this is not ex­pec­ted un­til the end of 2021/be­gin­ning of 2022.

 

How would you describe the investment climate in Austria? Which sectors offer the largest potential?

Due to the gov­ern­ment's pro­mo­tion­al meas­ures and the up­swing in the in­ter­na­tion­al in­dus­tri­al eco­nomy, the in­vest­ment cli­mate can be de­scribed as ro­bust. The Fed­er­al Gov­ern­ment is at any rate en­deav­our­ing to do its part. In ad­di­tion to the in­vest­ment premi­um (to be ap­plied for by the end of Feb­ru­ary 2021), tax meas­ures such as ac­cel­er­ated de­pre­ci­ation of build­ings, de­clin­ing bal­ance de­pre­ci­ation and the in­vest­ment-re­lated tax al­low­ances for nat­ur­al per­sons, which have been in place for some time, should be men­tioned here. There will be catch-up ef­fects, es­pe­cially in the sec­tors hit hard by the lock­down.

 

What challenges do German companies face during their business ventures into Austria?

Ger­man en­tre­pren­eurs are gen­er­ally not con­fron­ted with any ex­traordin­ary chal­lenges when en­ga­ging in Aus­tria. Of course there are dif­fer­ences, but they are of sec­ond­ary im­port­ance and usu­ally play only a minor role. Due to the com­mon lan­guage as well as the geo­graph­ic­al prox­im­ity, many pro­ced­ures are sim­il­ar – also in tax law. Tax, com­pany and com­mer­cial law sys­tem­at­ic­ally co­in­cide to a large ex­tent with Ger­man law, so no ma­jor sur­prises are to be ex­pec­ted.

Se­cure and stable eco­nom­ic con­di­tions in Aus­tria make a com­mit­ment for Ger­man com­pan­ies man­age­able and plan­nable. Neg­at­ive sur­prises, however, are al­ways to be found in the area of trade law and the li­cens­ing of busi­ness fa­cil­it­ies. The of­ten propag­ated one-stop-shop prin­ciple for found­ing and open­ing a busi­ness can­not al­ways be im­ple­men­ted in prac­tice. On the whole, Ger­man en­tre­pren­eurs should be able to find their way around in Aus­tria re­l­at­ively quickly and not en­counter any sig­ni­fic­ant prob­lems. However, it is ad­vis­able to seek tax and leg­al ad­vice when en­ter­ing the mar­ket in or­der to avoid small but all the more an­noy­ing stum­bling blocks

 

Why should companies choose to enter/remain in the Austrian market?

Aus­tria of­fers at­tract­ive frame­work con­di­tions for for­eign com­pan­ies. As be­ing one of the richest coun­tries in the EU, Aus­tri­an con­sumers have above-av­er­age pur­chas­ing power.

The in­fra­struc­ture is highly de­veloped and the ad­min­is­tra­tion is mod­ern and ef­fi­cient. In ad­di­tion, the qual­ity of life in Aus­tria is very high. Vi­enna is reg­u­larly ranked among the most live­able cit­ies in the world in vari­ous rank­ings. The high level of per­son­al safety cer­tainly con­trib­utes to this. Aus­tria is also re­l­at­ively safe with re­gard to cli­mate change and nat­ur­al dis­asters triggered by it. The se­cur­ity of sup­ply with elec­tric­al en­ergy has the highest pri­or­ity in Aus­tria, which is why Aus­tria oc­cu­pies a top po­s­i­tion in this re­spect in com­par­is­on with oth­er European coun­tries.

Fur­ther­more, Aus­tria is polit­ic­ally very stable and has a re­li­able leg­al sys­tem. Re­la­tions between em­ploy­ers and em­ploy­ees are tra­di­tion­ally very good, which res­ults in a very low num­ber of strike days. Aus­tria has a large highly skilled la­bour force, which is re­flec­ted in high la­bour pro­ductiv­ity. One of the reas­ons for this is the dual edu­ca­tion sys­tem prac­tised in Aus­tria, which com­bines the­ory and prac­tice and leads to an op­tim­al link between busi­ness and edu­ca­tion.

An­oth­er ad­vant­age of Aus­tria is its cent­ral loc­a­tion in Europe. Vi­enna is the lead­ing hub for air traffic and lo­gist­ics to Cent­ral and East­ern Europe – there­fore, it of­fers ex­cel­lent ac­cess to these mar­kets.

Last but not least, Aus­tria is also fisc­ally com­pet­it­ive due to at­tract­ive group tax­a­tion and a dense net­work of double tax­a­tion agree­ments.

 

In your opinion, how will Austria develop?

After over­com­ing the Cov­id-19 pan­dem­ic, eco­nom­ic growth is ex­pec­ted to reach 4 to 5 per cent in 2022. The year 2022 will thus be the year of re­cov­ery from the Cov­id-19 crisis. This de­vel­op­ment will be driv­en primar­ily by private con­sump­tion, in­vest­ment activ­it­ies and for­eign trade. The pos­it­ive con­sump­tion mo­mentum is due to the spend­ing of in­vol­un­tary sav­ings. Sec­tors par­tic­u­larly af­fected by the crisis, such as tour­ism, the hos­pit­al­ity in­dustry and trade, will profit from this. In many ser­vice sec­tors, however, eco­nom­ic out­put in 2022 is likely to re­main be­low the pre-crisis level, while this will be reached or pos­sibly even ex­ceeded in the eco­nomy as a whole. The re­cov­ery of the glob­al eco­nomy will also give Aus­tri­an ex­ports a lot of tail­wind. This will give pos­it­ive im­pulses to the ex­port-ori­ented in­dustry in par­tic­u­lar. Em­ploy­ment de­mand will pick up again and lead to a gradu­al de­cline in the un­em­ploy­ment rate. In­fla­tion is ex­pec­ted to tem­por­ar­ily rise above 2 per cent from late sum­mer due to in­creased com­mod­ity prices and stronger de­mand for some ser­vices, but in­fla­tion­ary pres­sures are ex­pec­ted to be sub­dued due to weak wage de­vel­op­ments.

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