Wide Angle Shot: Inflation shock for Austria's competitiveness?
Austria's high inflation rate will cause Austrian industrial companies to lose ground to their European competitors in the short term. However, this inflation shock need not be the prelude to a creeping decline of domestic industry. After all, if companies not only become more expensive, but also better, competitiveness need not suffer. However, this will require additional efforts – and additional burdens must be avoided.
“In Austria, the inflation premium over the euro area is very high at the present time. In the medium term, this is having an impact on the price competitiveness of the domestic economy. For industry, this may be less of a burden than for the service sector. In the last decade, domestic industry has been able to absorb higher trend inflation through productivity increases. However, the current "inflation surcharge backpack" is of such size that further additional burdens must be avoided.”
Gunter Deuber, Chief Economist, Raiffeisen Research, RBI
“Austria is currently a "high inflation country" in a euro comparison. However, the beginning of a new era in which domestic consumer prices will rise noticeably faster over many years is not in sight. Sooner or later, Austrian inflation is likely to fall back into the upper midfield. What will then remain is a price level that is likely to have risen by a total of 4 percentage points more than in the euro area in the years 2023 to 2025. That is "a lot in a short time", but in total less than in the episode between 2011 and 2022.”
Matthias Reith, Senior Economist Economics, Rates & FX Research
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