27.03.2017 - Austria: economic outlook significantly improved

  • Rising economic expectations despite higher political risks
  • Inflation is still on the rise; oil price expected to reach USD 60 by mid-year
  • Monetary policy divergence between the ECB and Fed further supports USD
  • ATX has a very good start into the new year

Similar to the spring-like temperatures outside, the 2017 economic outlook for Austria is rather friendly. Following an economic acceleration in the second half of the past year and a total GDP growth of 1.5 per cent in 2016, the analysts of Raiffeisen RESEARCH raised their economic forecast for 2017 by 0.4 percentage points. For this year, Raiffeisen RESEARCH expects an increase in GDP of 1.7 per cent. In comparison: for Germany too, a GDP growth of 1.7 per cent is expected, while the euro area should even grow by 1.9 per cent this year. It is worth mentioning that the growth shares from domestic demand, driven by private consumption and investments, and from exports are relatively balanced.

Peter Brezinschek, Chief Analyst of Raiffeisen Bank International AG (RBI) and Global Head of Raiffeisen RESEARCH, says: “Since the beginning of the year, the Purchasing Managers' Index, which is currently at 57.2, has been showing its highest value since March 2011. It seems like the Austrian economy got used to the political risks surrounding the ‘Brexit’, the uncertainty factor ‘Donald Trump’ as well as the European debt crisis and is again looking into the future more optimistically.”

In the previous year, Austrian companies invested 6.4 per cent more in equipment, such as machines or vehicles, which of course will also benefit the overall competitiveness in the medium term. It is striking that many companies have been renewing their company fleet since 2016 in order to benefit from the tax advantages for new cars with lower CO2 emissions. The sentiment is also positive in the construction industry. However, housing construction saw stagnation in 2016, but in the years to come Raiffeisen RESEARCH expects further impetus in this area given the rising demand. In addition to the ongoing solid domestic demand, Raiffeisen RESEARCH also predicts a positive growth contribution from net exports in 2017. The order books are well filled and Austrian exporters register growing demand in particular from the euro area, but also from Central Europe.

“The steady improvement in the economic sentiment since the second half of 2016 astonishes, especially given the surprising outcome of the US presidential elections and the upcoming ‘super election year’ in Europe. In general, arise from the political movements in France, Italy and Germany, which are very critical towards the EU, the market economy and free trade,” continues Brezinschek.

Inflation is still on the rise; oil price expected to reach USD 60 by mid-year

In 2017, Austria will continue to meet its reputation as a “high inflation country” within the euro area. After the inflation rate stood at 1.0 per cent (euro area: 0.2 per cent) in 2016, Raiffeisen RESEARCH is expecting 2.0 per cent for the current year. However, the gap to the euro area average will be significantly reduced, as the euro area’s inflation rate is expected to come in at 1.8 per cent. The main reason for this acceleration is the rise in oil prices. Based on the robust global demand and the increasing reduction of OPEC’s global oil storage, the analysts of Raiffeisen RESEARCH expect the oil price to reach USD 60 per barrel Brent by mid-year. In the fourth quarter and at the beginning of 2018, however, the already increasing shale production in the US should again lead to a price decline to below USD 60 per barrel Brent.

Monetary policy divergence between the ECB and Fed further supports USD

“The significantly higher expected price increase of 2.5 per cent in the US versus the expected inflation rate of 1.8 per cent in the euro area makes it clear why the US Federal Reserve plans more interest rate hikes in 2017 than anticipated by the markets in December 2016 and why the European Central Bank (ECB) will wait for a longer time,” analyzes Brezinschek.

The analysts at Raiffeisen RESEARCH expect two to three interest rate hikes by the US Federal Reserve (Fed) during the year, while the ECB is likely to raise the key rate at the earliest in the second half of 2018. As a result, the USD should revaluate by about 5 cents from its current level to 1.02 EUR/USD by the third quarter of 2017. According to this, the exchange rate should move in favor of the euro and be at 1.07 EUR/USD by the end of 2018 -- it is therefore quite realistic to reach parity.

ATX has a very good start into the new year

With an increase of more than 7 per cent to above 2,800 points, the Viennese leading index ATX started very well into the new year and continued the previous year’s strong development. As a result, the Austrian equities market showed a stronger performance than European benchmark indices, which rose in the lower to mid-single-digit percentage range. According to the experts from Raiffeisen Centrobank, this reflects the noticeably improved perception of Austria and the CEE region among investors. On the one hand, the improved cyclical dynamics in the euro area have a positive impact on the Austrian economy. On the other hand, CEE core countries should be able to achieve robust economic growth of around 3 per cent in 2017 and thus again show a positive growth delta towards the euro area. Moreover, the expected further steepening of the yield curve will also improve the environment for the financial industry. The earnings estimates were previously slightly increased, which meant that the expansion of the valuation ratios as a result of the price increases was also very limited. Currently, the ATX is trading at an expected PER of just under 13 for the year 2017, a further increase to 3,000 points by the end of the year is expected.

Financial analyst: Peter Brezinschek, RBI Vienna


On 27 March 2017, Raiffeisen RESEARCH, an organizational unit of Raiffeisen Bank International AG (RBI), published its two capital market strategies “Central & Eastern European[1] Strategy“ and “Global Markets“ for the second quarter of 2017. Full versions of both strategies can be ordered from aleksandra.srejic@rbinternational.com.


Editor: Helge Rechberger, Financial Analysts, RBI

Cut-off for data: 24 March 2017, 3:55 PM CEST

Completed: 27 March 2017, 8:30 AM CEST

First dissemination: 27 March 2017, 10:00 AM CEST


[1] Central and Eastern Europe (CEE) is composed of the regions of Central Europe (CE) with the Czech Republic, Poland, Slovakia, Slovenia and Hungary, Southeastern Europe (SEE) is composed of Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Romania and Serbia as well as the region Eastern Europe (EE) with Belarus, Russia and Ukraine.

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