The Current Account and its Components in 1994/95
AbstractThe deficit of the current external account is set to widen to Sch 19 billion in 1994 and 25 billion in 1995. Developments in the trade balance are, by themselves, no major cause for concern. However, a decline in tourism competitiveness implies that the traditional surplus of this sector will cover an ever falling part of the merchandise trade deficit. Moreover, the deficit in the transfer balance rises markedly with Austria's contribution to the EU budget. Since 1993 the balance on current account has progressively deteriorated. For the first time since the early 1980s, the deficit may exceed 1 percent of GDP in 1995. Still, recent developments are no immediate cause for concern. High net capital inflows over the last years underline the high credibility of Austria's economic policy and allow smooth financing of small current account deficits. The recent deterioration of the current account is the result of compounded special factors. One is the growth differential between Austria and other European countries in 1993 and 1994 which has accelerated the growth of exports over imports. A decline in disposable income in Germany during the recession hit the domestic tourism industry in particular while spending by Austrians abroad rose markedly. Another factor is the substantial rise in the real-effective schilling exchange rate, by 2.6 percent in 1992 and 3 percent in 1993. While the manufacturing sector has been able to largely offset the resulting weakening of competitiveness by productivity gains, these are more difficult to achieve in tourism and other services. A third reason for the rising external deficit is the composition of foreign versus domestic demand. Imports are more highly concentrated on finished items such as investment goods than exports. The cut in the general investment tax allowance as of April 1994 induced many firms to pre-emptive spending on machinery and equipment which, by boosting imports, led to a higher trade deficit in the first quarter of the year. Moreover, with Austrian tourism exports concentrated on the German market and in particular the lower and middle-income strata, the squeeze in German household incomes had a strong negative effect on the services balance. The recovery in Europe may be expected to lead to an improvement in the Austrian current account. Nevertheless, recent developments should be taken as a warning sign. Net transfers to the EU will burden the transfer balance by Sch 12 billion in 1995 and rise progressively thereafter. This and the prospect of further losses in tourism market shares may be taken as auspices that the traditional quasi-zero balance in the current account may no longer be taken for granted.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by WIFO in its journal WIFO-Monatsberichte.
Volume (Year): 67 (1994)
Issue (Month): 12 (December)
Postal: Austrian Institute of Economic Research Publikationsverkauf und Abonnentenbetreuung Arsenal, Objekt 20 A-1030 Vienna/Austria
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilse Schulz).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.