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Stable Growth in Austrian Manufacturing in 2000, Investment Plans Not Overly Optimistic

Author

Listed:
  • Margarete Czerny

    (WIFO)

  • Kurt Kratena
  • Michael Pfaffermayr

Abstract

Growth prospects for the Austrian economy are expected to improve significantly in 2000. The European economy has gained momentum, the American economy still follows a stable growth path, and Asia and Latin-America are on the road to recovery. WIFO predicts that the Austrian GDP will achieve a real growth rate of 2.8 percent. In the recent business surveys among manufacturing firms most responses were optimistic. All seasonally adjusted indictors have followed an upward trend over the past months. The indicators of production and business climate expectations for the next months point at a continuation of this trend for the rest of the year. According to the most recent WIFO forecast of December 1999, manufacturing output is likely to grow at a rate of 4.3 percent in 2000. Overall conditions for investment are still excellent in Austria. Austrian manufacturing are expanding. Additionally, they have been able to improve their competitiveness in recent years thanks to above-average productivity growth and moderate wage increases. According to the latest WIFO forecast, labour unit costs are expected to decrease further by 1.2 percent vis-à-vis the major trading partners. Relatively low interest rates and high cash flows likewise contribute to the favourable investment climate in Austria. WIFO expects an overall increase of investment of 3.9 percent in real terms for 2000. According to the recent investment survey, manufacturing firms plan to invest ATS 87.6 billion, i.e., 4 percent above the 1999 level. Several firms plan major investment projects (petroleum, metals, electronics, chemical products and transport). The increase in investment is expected to be highest in sectors producing investment goods (+20 percent), non-durable consumer goods (12.6 percent), food and beverages (10.9 percent) and transport equipment (10.8 percent). Producers of intermediate products plan approximately the same volume of investment as in 1999 (–0.7 percent) whereas producers of durable consumer goods intend to reduce their investments by 21.7 percent. The construction industry is expected to expand by 1.5 percent in nominal terms in 2000 and plans investments in plants and machinery of ATS 4.05 billion, which amounts to just two thirds of the 1999 volume. One reason for the pessimistic investment plans may be the envisaged reduction of the public deficit which has made civil engineering firms – expecting to be affected most – to curtail their investment plans. Public electricity utilities cut investments by 14.5 percent. The "Verbund Konzern", the largest electricity supplier in Austria, again plans massive reductions. This has to be seen as a response to liberalisation of the energy markets in Europe. Firms expect that stranded investments will be only partly accepted by the EU Commission, and they are building up balance sheet reserves against this contingency. Transport firms as well as other utilities (gas, water, etc.) will increase their investments by 3.1 percent.

Suggested Citation

  • Margarete Czerny & Kurt Kratena & Michael Pfaffermayr, 2000. "Stable Growth in Austrian Manufacturing in 2000, Investment Plans Not Overly Optimistic," WIFO Monatsberichte (monthly reports), WIFO, vol. 73(2), pages 75-85, February.
  • Handle: RePEc:wfo:monber:y:2000:i:2:p:75-85
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