Oecd Economic Surveys : Austria 1980-1981.

75 Pages·4.853 MB·English

by  OECD

OECD
ECONOMIC SURVEYS
AUSTRIA
JANUARY 1981
BASIC STATISTICS OF AUSTRIA
THE LAND
Area (thousand km2) 84 Majorcities, May 1971 census
Agricultural area (thousand km3) 38 (thousandsofinhabitants):
Exploited forest area (thousand km1) 32 Vienna 1 615
Graz 249
Linz 203
Salzburg 129
Innsbruck 115
THE PEOPLE
Population, 31.12.79 (thousands) 7505 Net migration, 1978 3802
per km1 89 Totalemployment1,monthly
Net natural increase in population, average 1979 2773700
1979 624 of which:
Natural increase rate in industry2 622714
per 1000 inhabitants, 1979
PRODUCTION
Gross Domestic Product, 1979 Industrial origin ofGDP atmarket
(Sch. billion) 914 prices, 1979 (percent):
per head (US J) 9110 Agriculture 4
Grossfixed investment, Industry 30
average 1977-1979: Construction 8
per cent of GDP 25 Other 58
per head (US $) 1 975
THE GOVERNMENT
Publicconsumption, 1979 CompositionofFederalParliament,
(per cent of GDP) 18 October 1979:
General governmentcurrent revenue, Socialist Party 95
1979 (per cent of GDP) 45 Austrian People's Party 77
FederalGovernmentdebt,end 1979 Liberal Party 11
(per cent of GDP) 25 Last election: 1979
Nextelection: 1983
FOREIGN TRADE
Exports: Imports:
Exportsof goods and services, Imports ofgoods and services,
1977-1979 1977-1979
(per cent of GDP) average 36 (per cent of GDP) average 37
Exports, 1979 (percent oftotal Imports, 1979(percent oftotal
merchandiseexports): merchandise imports):
Food, tobacco, beverages 4 Food, tobacco, beverages 6
Raw materials and energy 10 Raw materials and energy 20
Chemicals 8 Chemicals 10
Machineryand Machinery and
transport equipment 28 transport equipment 30
Otherfinished and Other finished and
semi-manufactured products 50 semi-manufactured products 34
THE CURRENCY
Monetary unit: Schilling Currency unitsperUS dollar,
average ofdaily figures:
Year 1979 13.37
November 1980 13.61
1 Wage and salaryearners.
2 Including administrativepersonnel.
Note An international comparison of certain basic statistics is given in an annex table.
OECD ECONOMIC SURVEYS
AUSTRIA
JANUARY 1981
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation for Economic Co-operation and Development
(OECD) was set up under a Convention signed in Paris on 14th
December 1960, which provides that the OECD shall promote policies
designed:
to achieve the highest sustainableeconomicgrowth andemploy¬
ment and a rising standard ofliving inMember countries, while
maintainingfinancialstability,andthustocontributetothedeve¬
lopment ofthe world economy;
tocontributeto soundeconomicexpansioninMemberaswellas
non-member countries in the process ofeconomic development;
to contribute to the expansion ofworld trade on a multilateral,
non-discriminatory basis in accordance with international
obligations.
The Members ofOECD are Australia, Austria, Belgium, Canada,
Denmark, Finland, France, the Federal Republic ofGermany, Greece,
Iceland, Ireland, Italy,Japan, Luxembourg, the Netherlands, NewZea¬
land,Norway,Portugal,Spain,Sweden,Switzerland,Turkey,theUnited
Kingdom and the United States.
TheSocialistFederalRepublicofYugoslaviaisassociated in certain
work oftheOECD,particularlythat oftheEconomic andDevelopment
Review Committee.
The annual review of Austria
by the OECD Economic and Development Review Committee
took place on 17th December 1980.
©OECD. 1981
Queriesconcerningpermissionsortranslationrightsshouldbeaddressed
to:
Director ofInformation, OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16. France.
CONTENTS
Introduction 5
I Recent trends 6
The impact of higher oil prices on growth and inflation 6
Demand and output 9
The labour market 11
Incomes, costs and prices 14
Balance of payments 19
II Economic policies 23
Fiscal policy 23
Monetary policy 29
HI Foreign trade and monetary policy - Medium-term developments 38
The current account 38
Some medium-term aspects of monetary policy 45
IV Short-term prospects and conclusions 47
Short-term prospects 47
Conclusions 51
Annexes
I Constant market share analysis of export growth 54
II Calendar of main economic events 57
Statistical annex 59
TABLES
Text
1 Demand and output 10
2 Labour market developments 13
3 Incomes, costs and prices 15
4 Balance of payments 20
5 Foreign assets and liabilities 22
6 Fiscal impact indicators 24
7 The Federal Budget 27
8 Financial debt of the Federal Government 28
9 Monetary development 30
10 Bank liquidity 35
OECD Economic Surveys
11 Determinants of the changes in total money (Ml) 36
12 Current external account 39
13 Foreign trade indicators 42
14 Determinants of export growth 43
15 Short-term prospects 48
16 Current balance forecast 50
Annex 1
Austrian export performance by countries and commodities 56
Statistical annex
A Gross domestic product 60
B General government income and expenditure 61
C Output, employment, wages and productivity in industry 62
D Retail sales and prices 63
E Money and banking 64
F The Federal budget 65
G Balance of payments 66
H Merchandise trade by commodity group and area 68
DIAGRAMS
1 Growth and inflation 7
2 Economic performance indicators 8
3 Stock-output ratio 9
4 The labour market 12
5 Contribution to change in total supply deflator 16
6 Relative energy prices to final users and final energy demand 17
7 Growth of factor incomes and factor shares 18
8 Impact of fiscal policy 25
9 Monetary indicators 32
10 Interest rates 33
11 Components of adjusted monetary base 37
12 Structure of the current account 40
13 Export performance 44
14 Import penetration 45
15 Indicators of cyclical position in industry 49
INTRODUCTION
The rapid expansion of the economy in 1979 continued into 1980; although
there was a sharp slowdown in the second half of the year, the growth of real
GDP in 1980 as a whole estimated at around 2i per cent has been a little
stronger than forecast in the last OECD Economic Survey of Austria. Final
domestic demand evolved much as was expected, but stockbuilding was stronger.
Imports rose faster than forecast, but exports were considerably less buoyant.
The consequent deterioration in the real trade balance was compounded by an
oil-induced terms of trade loss entailing a marked widening of the current
external deficit. Higher oil prices were largely responsible for the acceleration
in consumer prices, but the rate of inflation has remained one of the lowest in
the OECD area, largely because of the acceptance by the social partners of the
real income loss attributable to higher oil prices. Indeed, the unique social
partnership reflected in wage moderation has been an important factor in
enabling so far the domestic economy to absorb relatively smoothly the "second
oil shock" without a major loss of employment.
The Secretariat's forecasts suggest that 1981 will be a year of stabilisation
following the period of rapid economic expansion and adjustment to higher
oil prices. Withdrawal of fiscal support, high interest rates and weak development
of real incomes are expected to dampen considerably the growth of final domestic
demand. Unemployment may rise a little, but the rate should remain among
the lowest in the OECD area. High interest rates are also expected to induce
a slowdown in stockbuilding which will have its counterpart in a fall in import
volumes. Export volumes, however, may rise about in line with markets.
The change in the real foreign balance, price developments and the sluggishness
of domestic demand will probably lead to a reduction in the current external
deficit, which nevertheless is forecast to remain at over 4 per cent of GDP1.
Despite slower productivity growth the rate of inflation is likely to be reduced,
reflecting weak demand and continued moderate wage settlements.
Recent economic developments, including an assessment of the effects of
the 1973-1974 and 1979-1980 oil price rises on growth and inflation, are
reviewed in Part I of this Survey. Economic policies, including an analysis
of a number of changes in monetary policy which have taken place over the
last two years, are analysed in Part II. Monetary developments are taken up
again in Part III, but in a medium-term setting and against the background of
longer-term trends in the current external account. Short-term prospects are
discussed in Part IV which also contains a summary of the main policy conclusions.
1 Including an adjustment by the Nationalbank for errors and omissions, the deficit
would be considerably lower.
OECD Economic Surveys
I RECENT TRENDS
The impact of higher oil prices on growth and inflation
The economy was growing rapidly in 1979 and the early part of 1980,
relatively unaffected by the sharp rises in oil prices since the end of 1978.
Experience after the first oil price shock in 1973-1974 shows, however, that
the effects on demand of the real income loss resulting from a sudden terms-
of-trade deterioration may take time to come through if inflationary expectations
and households' attempts to maintain their standard of living temporarily support
demand. As can be seen from Diagram 1, a similar response by the real
economy is occurring in the wake of the second oil shock but the reaction lag
seems to have been somewhat longer. In both cases also the economy took
longer to respond to the two oil shocks than the major seven OECD countries2.
This contrasting behaviour reflects mainly the different cyclical positions at the
time of the oil price rises; whereas the major seven countries taken together
were already experiencing a strong slowdown in growth in the course of 1973,
the expansion of real GDP in Austria continued to accelerate during the first
half of 1974. Much the same pattern occurred in 1978 and 1979, the rate
of real GDP in the major seven countries slowing down in the first half of 1979.
While at the time of the two major oil price rises, Austria was cyclically
out of phase with the major seven countries, underlying conditions in the
economy also differed considerably (Diagram 2). The differences suggest that
the present slowdown is less sharp than in 1974-1975 and that it may be shorter.
Of particular importance was the different starting points of price rises; in
1978-1979 consumer prices were rising by about 5 percentage points less than
in 1973-1974 (Diagram 1, lower panel). To some extent the considerably
slower pace of inflation in 1978 and 1979 can be ascribed to the 1977 fiscal
and monetary measures designed to reduce demand for imports and to increase
government revenues. This policy package boosted final domestic demand by
the end of 1977 as a result of anticipatory expenditures but dampened demand
and prices in the course of 1978. But probably more important for stabilisation
after the second oil shock was that wage earners have accepted the withdrawal
of real income and adapted their expenditure behaviour relatively quickly to the
changed global economic environment by reducing their savings and incurring
extra debt. In sharp contrast, wages reacted strongly in 1974-1975 to the oil
price rise3 so that real wage income increased considerably.
Mirroring wage moderation in conjunction with relatively strong demand,
a salient difference in favour of the present situation compared with 1974-1975
is the financial position of the corporate sector. After the first oil shock the
financial deficit of the corporate sector, which had already been worsening, rose
further, reflecting the squeeze on profits as unit labour costs and industrial
input prices rose faster than final prices in weakening markets. Companies
sharply curbed investment spending, substantially deepening and extending the
recession. Stocks were also vigorously reduced. In 1979, the profit situation
of the corporate sector was particularly favourable and capacity utilisation reached
its highest level for the second half of the 1970s. At present, revenue expectations
of entrepreneurs are still rather encouraging and the underlying conditions for
investment have not so far deteriorated to any important extent.
2 Cf. OECD, Economic Outlook, No. 7.7, p. 17.
3 Average monthly wages rose by 15.7 per cent in 1974 and by 13.4 per cent in 1975.
Austria
Diagram 1 Growth and inflation
Percentage changes from previous halfyear, seasonally adjusted at annual rates
1972 1973 1974 1975 1976 1977
-Majorinitialimpactofeach REAL GDP
oilshock
7
6
/ i** -" I 5
1
1
I 1972-77 4
I (scaleabove)
» WIFO- 3
H /forecast
«/
tv OECD-forecast 2
w
w f\im-t\ 1
w I (scalebelow)
\ / w
0
\ /
A' ! -1
Effectofbalance
ofpayments -2
stabilisation
i
measures \ -3
-4
-5
1977 1978 1979 1980* 1981*
1972 1973 1974 1975 1976 1977
11 11
PRIVATE CONSUMPTION DEFLATOR
10 10
9 9
8
7
1972-77
(scaleabove)
6
5
4
3
1977 1978 1979 1980* 1981*
* Forecasts.
Sources: Ôsterreichisches Institut fur Wirtschaftsforschung; OECD Secretariat.
OECD Economic Surveys
Diagram 2 Economic performance indicators
* %
3.5 EMPLOYMENTi 3.5
Unemployment1 inpercentofdependentlabourforce
3.0 3.0
2.5 2.5
2.0 2.0
1.5 1.5
1.0 1.0
S 10" 10%
VolumegrowthofGDP
8 8
6 6
4 4
AVERAGE 1MO-197»
2 2
0 0
-2 -2
X 12 iPRICE STABILITYi 12 %
Percentincreaseinimplicitdeflatorforprivateconsumption
10 10
8
6 6
4 4
2 2
iEXTERNAL BALANCE.
X 2~p CurrentbalanceofpaymentsinpercentofGDP 2 X
/\ Currentbalancepluserrorsandomissions
V»^\
!_/
-2 - Currentbalance v'\ -2
-6 -
% n-LZ BALANCED BUDGET
FederalbudgetdeficitinpercentofGDP2
-2 -
-6 U J
1960 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80*
* Preliminary estimates.
1 Adjusted for changes in statistics.
2 Net lending excluding debt repayment; administrative basis.
Sources: Osterreichisches Institut fiir Wirtschaftsforschung; Ministry ofFinance; OECD.