Austria: Selected Issues

This Special Issues paper explores the reasons for Austria’s downturn and growth underperformance through several perspectives. The broad picture that emerges is a downturn that has been especially large in the manufacturing and construction sectors as higher interest rates and weak confidence have sharply depressed investment and inventory accumulation. Identifying reasons for the growth underperformance in manufacturing is complicated by the fact that the downturn is broad-based and not limited to specific subsectors of manufacturing. However, the decline may partly reflect a reversal of unusually high manufacturing growth during 2019–2022. The larger drop in construction activity than in the rest of the euro area during 2023–2024 may be due in part to somewhat higher house price overvaluation leading up to the decline. Other contributors to Austria’s growth underperformance include higher household saving rates amid weak confidence and a reduction in real spending per tourist arrival, among other factors. The gross domestic product decline is also reflected in a large drop in productivity in manufacturing and construction, perhaps as a result of lower investment and labor hoarding amidst weak demand.