Economy

The economy of the Republic of Austria may be characterised as a social market economy similar in structure with Germany's. The country has a very high standard of living in which the government has played an important role in its citizen's life ever since 1945. Austria is the 4th richest country within the European Union, having a GDP (PPP) per capita of approximately US$34,600, (2006) with Luxembourg, Ireland and Denmark leading the list. Vienna is ranked the 6th richest NUTS-2 region within Europe with US$38,000 GDP per capita. Growth has been steady but slow in the years 2002-2005 varying between 1 and 2.5 %. Because of its position in central Europe it has gained significance as a gateway to the new EU member states.

Austria has a well-developed social market economy and a high standard of living. Until the 1980s many of Austria's largest industry firms were nationalised, however in recent years privatisation has reduced state holdings to a level comparable to other European economies. Labour movements are particularly strong in Austria and have large influence on labour politics.

History

Ever since the end of the World War II Austria has achieved sustained economic growth. In the 1950s, the rebuilding efforts for Austria lead to an average annual growth rate of more than five percent in real terms and averaged about four point five percent through most of the 1960s. Following moderate real GDP growth of one point seven percent, two percent and one point two, respectively, in 1995, 1996, and 1997, the economy rebounded and with real GDP expansion of two point nine percent in 1998 and two point two in 1999.

Austria became a member of the EU on January 1, 1995. Membership brought economic benefits and challenges and has drawn an influx of foreign investors attracted by Austria's access to the single European market .Austria also has made progress in generally increasing its international competitiveness. As a member of the economic and monetary union of the European Union (EMU), Austria's economy is closely integrated with other EU member countries, especially with Germany. On January 1, 1999, Austria introduced the new Euro currency for accounting purposes. In January 2002, Europe notes and coins were introduced and substituted for the Austria/Austrian Schilling.

Privatisation

Many of the country's largest firms were nationalized in the early post-war period to protect them from Soviet takeover as war reparations. For many years, the government and its state-owned industries conglomerate played a very important role in the Austrian economy. However, starting in the early 1990s, the group was broken apart, state-owned firms started to operate largely as private businesses, and a great number of these firms were wholly or partially privatised. Although the government's privatisation work in past years has been very successful, it still operates some firms, state monopolies, utilities and services.

Labour Movements

Austria has a strong labour movement. The Austrian Trade Union Federation (ÖGB) comprises constituent unions with a total membership of about 1.5 million - more than half the country's wage and salary earners. Since 1945, the ÖGB has pursued a moderate, consensus-oriented wage policy, cooperating with industry, agriculture, and the government on a broad range of social and economic issues in what is known as Austria's "social partnership". The ÖGB has often opposed the Schüssel government's program for budget consolidation, social reform, and improving the business climate, and indications are rising that Austria's peaceful social climate could become more confrontational.

Sectors

Agriculture Sector

Austrian farms, like those of other west European mountainous countries, are small and fragmented, and production is relatively expensive. Since Austria's becoming a member of the EU in 1995, the Austrian agricultural sector has been undergoing substantial reform under the EU's Common Agricultural Policy (CAP). Although Austrian farmers provide about 80% of domestic food requirements, the agricultural contribution to gross domestic product (GDP) has declined since 1950 to 1.8% (2005).

Industry Sector

Although some industries are global competitors, such as several iron and steel works, chemical plants and oil corporations that are large industrial enterprises employing thousands of people, most industrial and commercial enterprises in Austria are relatively small on an international scale. The sector contributed 30.4% of the country's GDP in 2005 and employed 27% of the labour force.

Service Sector

The service sector is the most important sector for Austria, generating the vast majority of Austria's GDP - 67.8% in 2005. Viennese law firms and banks are among the leading corporations in business with the new EU memberstates. Also important for Austria's economy is tourism, both winter and summer. It's the 10th most visited country in the world with over 18,2 million tourists in 2001. Its dependency on German guests has made this sector of Austrian economy very dependent on German economy, however recent developments have brought a change, especially since winter ski resorts such as Arlberg or Kitzbühel are now more and more frequented by Eastern Europeans, Russians and Americans.

Trade Position

Trade with other EU countries accounts for almost 66% of Austrian imports and exports. Germany has historically been the main trading partner of Austria, making it vulnerable to rapid changes in the German economy. Slow growth in Germany and elsewhere in the world affected Austria, slowing its growth to 0.8% in 2001. But since Austria became a member state of the European Union it has gained closer ties to other European Union economies, reducing its economic dependence on Germany (31% of exports and 46% of imports in 2005). In addition, membership in the EU has drawn an influx of foreign investors attracted by Austria's access to the single European market and proximity to EU aspiring economies.

Expanding trade and investment in the emerging markets of central and Eastern Europe is a major element of Austrian economic activity. Trade with these countries accounts for almost 14% of Austrian imports and exports, and Austrian firms have sizable investments in and continue to move labour-intensive, low-tech production to these countries. Although the big investment boom has waned, Austria still has the potential to attract EU firms seeking convenient access to these developing markets.

Total trade with the United States in 1999 reached $6.6 billion. Imports from the United States amounted to $3.7 billion, constituting a U.S. market share in Austria of 5.4%. Austrian exports to the United States in 1999 were $2.9 billion or 4.6% of total Austrian exports.