Dated: 22nd April 2017

Submitted to

Sir Ghayyur Alam

Submitted by

Bilal Anwar (57385)

Subject

Micro and Macro Economics

 Economy of Austria

1. Introduction to Austria
The Republic of Austria is a landlocked country in Central Europe. Neighboring countries include Czech
Republic, Germany, Hungary, Italy, Liechtenstein, Slovakia, Slovenia, and Switzerland. West and South
Austria is located in the Alps while the rest of the country is mostly flat. The government system is a
federal republic; the chief of state is the president, and the head of government is the federal
chancellor. Austria has a mixed economic system which includes a variety of private freedom, combined
with centralized economic planning and government regulation. Austria is a member of the European
Union (EU). Vienna is capital of Austria and currency used in Austria is Euro.

2. Introduction to Economy of Austria

The Austrian economic system can be characterized as a free market economy with a strong social focus
by also taking into account the weaker members of society. Austria also features a tried and tested
system of economic and social partnership, which has traditionally played a strong and reconciliatory
role in wage and price policies.

Austria is a highly developed industrialized country with an important service sector. The most
important industries are food and luxury commodities, mechanical engineering and steel construction,
chemicals, and vehicle manufacturing.

In the field of agriculture, Austria is witnessing a strong trend towards organic farming. With an overall
share of 11.9%, organic farms in Austria occupy a leading position among the EU Member States. In this
organic branch of agriculture, 88.1% of enterprises are dedicated to livestock farming.

As regards raw materials and energy production, Austria can draw on an abundance of resources. It has
natural resources of iron ore, non-ferrous metals, important minerals and earths. The constant growth
of the industrial sector, however, increasingly requires supplementary imports. This is also true of fuels,
energy resources, and the electricity-generating industry. Austria has its own resources of petroleum
and natural gas. The generation of hydroelectric power is constantly being expanded, which makes
Austria the leader in the field of hydroelectric power in the European Union.

Austria's industrial and commercial sectors are characterized by a high proportion of medium-sized
companies. Austrian industry covers every branch of manufacturing, from basic goods to the labor-
intensive production of highly processed products. The construction of plants and systems
(encompassing the planning, delivery, and assembly of turn-key production facilities, including the
required know-how and operational expertise) is making up an increasingly important share. This field is
strongly export-oriented, as is the electronics sector (including, for instance, the production of
integrated circuits).

Austria is world-famous for its arts and crafts, most notably fine hand-crafted items, costumized
jewellery, ceramics, and glassware. Tourism is an essential pillar of the Austrian economy. Austria is a
mountainous country with one of the largest natural land reserves in central Europe.

In the global-political arena, Austria is increasingly becoming an international meeting point, which is
illustrated by the large number of summits and conferences held in Austria. At the same time, the
country's relevance as a vital transit country between the economic areas of Europe is increasing,
especially for European energy supplies, including petroleum, natural gas, and electricity.

3. Gross Domestic Product

The Gross Domestic Product (GDP) in Austria was worth 376.95 billion US dollars in 2015. The GDP value
of Austria represents 0.61 percent of the world economy. GDP in Austria averaged 159.95 USD Billion
from 1960 until 2015, reaching an all-time high of 438.38 USD Billion in 2014 and a record low of 6.59
USD Billion in 1960.
 4. Foreign Investment
Austria has traditionally attracted significant amount of FDI owing to its geographical location as an
intersection of Eastern and Western Europe. However, this strategic attraction seems to ebb away as
FDI inflow and outflow trends have been unstable, though mainly downward in recent years. In 2015,
FDI rose compared to 2014. On the other hand, Austria does fairly well in term of business environment
as it ranks 19th out of 190 countries in the World Bank's 2017 Doing Business ranking.

The top five countries that invest in Austria are Germany, the Netherlands, Italy, Luxembourg and
Russia. However, overall Austria remains a capital exporter: its FDI outflows exceed its inflows. In order
to encourage foreign investment, Austria provides welcoming conditions for foreign companies that
want to invest in capital-intensive industries and in research and development, for which considerable
tax breaks are available.

Austria's strengths are its political stability, its location at the centre of Europe and its skilled and highly
productive workforce. However, Austria has been impacted by the deterioration of the political and
security situation in Ukraine since the end of 2013, as well as the low growth prospects in Southeast
Europe
Foreign Direct Investment 2013 2014 2015

FDI Inward Flow (million USD) 5,720 9,324 3,837

FDI Stock (million USD) 178,825 176,607 164,784

Number of Greenfield Investments*** 73 70 47

FDI Inwards (in % of GFCF****) 5.9 9.5 4.6

FDI Stock (in % of GDP) 41.7 40.4 44.0

Source: UNCTAD, 2015

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The
UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use,
R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a
Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of
Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
 Main Investing Countries 2015, in %

Germany 32.6

United States 8.6

Italy 4.5

Switzerland 3.8

United Kingdom 3.5

Main Invested Sectors 2015, in %

Professional, scientific and technical service activities 46.3

Trade 19.0

Financial intermediation 6.9

Chemicals, petroleum products, pharmaceuticals 6.0

Manufacture of transport equipment 3.9

5. Foreign Exchange Reserves

Foreign Exchange Reserves are the foreign assets held or controlled by the country central bank. The
reserves are made of gold or a specific currency. They can also be special drawing rights and marketable
securities denominated in foreign currencies like treasury bills, government bonds, corporate bonds and
equities and foreign currency loans. Foreign Exchange Reserves in Austria decreased to 22619 EUR
Million in March from 22924 EUR Million in February of 2017. Foreign Exchange Reserves in Austria
averaged 15694.33 EUR Million from 1999 until 2017, reaching an all-time high of 23831 EUR Million in
July of 2016 and a record low of 8855 EUR Million in December of 2004.
 6. GDP Growth Rate
Austria's gross domestic product expanded 0.5 percent on quarter in the three months to December
2016, the same as in the previous period and in line with the preliminary estimate. Household
consumption grew 0.5 percent (0.6 percent in Q3) and government expenditure advanced 0.4 percent
(0.3 percent in Q3) while fixed investment showed no growth. Meanwhile, net external demand
continued to contribute negatively, as exports edged up 0.1 percent (the same as in Q3) and imports
rose at a faster 0.3 percent (the same as in Q3). Year-on-year, the GDP expanded 1.7 percent after
growing by 1.3 percent in the previous period and below a preliminary figure of 1.8 percent. In 2016, the
economy advanced 1.5 percent, the highest growth rate since 2011. GDP Growth Rate in Austria
averaged 0.44 percent from 1996 until 2016, reaching an all-time high of 1.20 percent in the third
quarter of 1999 and a record low of -1.50 percent in the first quarter of 2009.
 7. Tax Collection Percentage
The tax-to-GDP ratio in Austria increased by 0.7 percentage points, from 42.8% in 2014 to 43.5% in
2015. The corresponding figures for the OECD average were an increase of 0.1 percentage point from
34.2% to 34.3% over the same period. Since the year 2000, the tax-to-GDP ratio in Austria has increased
from 42.1% to 43.5%. Over the same period, the OECD average in 2015 was slightly above that in 2000
(34.3% compared with 34.0%). Austria ranked 5th out of 35 OECD countries in terms of the tax-to-GDP
ratio in 2015.* In 2015, Austria had a tax-to-GDP ratio of 43.5% compared with the OECD average of
34.3%. In 2014, Austria was ranked 6th out of the 35 OECD countries in terms of the tax-to-GDP ratio.

8. Trade Balance
The trade balance for Austria and other countries is calculated as the difference between the exports
and imports of goods and services, as percent of GDP. A positive number means trade surplus and a
negative number means trade deficit. Austria's economy is dependent on foreign trade and closely
linked to the economies of other EU countries, particularly Germany. The major export commodity in
Austria is the automobile and its components, machinery and paper products. Austria imports mainly
machinery and equipment, motor vehicles, chemicals, metal goods, oil and oil products and foodstuffs.

Total Exports for Austria in 2015 were $145,277,307,184 and Total Imports were $147,935,123,859.
Trade balance was -$2,657,816,675.

9. Inflation Rate
Consumer prices in Austria increased 2 percent year-on-year in March of 2017, following a 2.2 percent
rise in the previous month. Prices rose at a slower pace for: transport (4.1 percent vs 5.4 percent);
housing and utilities (1.7 percent vs 1.9 percent); food and non-alcoholic beverages advanced (1.6
percent vs 2.3 percent) and recreation and culture (1.8 percent vs 2 percent). On a monthly basis,
consumer prices went up 0.6 percent. Inflation Rate in Austria averaged 3.28 percent from 1958 until
2017, reaching an all time high of 10.20 percent in September of 1974 and a record low of -3 percent in
March of 1959.
 10.Unemployment Rate
The unemployment rate in Austria declined to 8.9 percent in March of 2017 from 9.4 percent a year
earlier. The number of unemployed persons went down by 13.5 thousand to 367.6 thousand. In
addition, youth unemployment fell to 11 percent (12.3 percent a year earlier) while long term
unemployment went up to 16.9 percent from 14.9 percent. Job vacancies increased by 44.5 percent or
16,378. Unemployment Rate in Austria averaged 4.87 percent from 1960 until 2017, reaching an all time
high of 10.90 percent in January of 2016 and a record low of 0.80 percent in August of 1974.

11.Per Capita Income

The Gross Domestic Product per capita in Austria was last recorded at 47754.60 US dollars in 2015. The
GDP per Capita in Austria is equivalent to 378 percent of the world's average. GDP per capita in Austria
averaged 31791.19 USD from 1960 until 2015, reaching an all time high of 47946.06 USD in 2012 and a
record low of 13087.94 USD in 1960.
Thanks