Recovery in Austria driven by rising exports

Recovery gained momentum in the second half of 2009 and in early 2010, thanks to improved stock investments and rejuvenated exports.
Analisis Credito y Caución
Madrid - 15-out-2010

Austria’s GDP declined 3.4% in 2009, due mainly to a drop in economic activity in the first half of last year. However, recovery gained momentum in the second half of the year and in early 2010, thanks to improved stock investments and rejuvenated exports. According to the Austrian Statistics office, between January and May 2010 exports increased 9.8%, while imports rose 9.7%. Industrial production rose 7.6% year-on-year in June 2010. Private consumption has increased moderately in the first half of the year, with retail turnover up 2.9% year-on-year. In Q2 of 2010, GDP grew 0.9% on the previous quarter and 1.9% year-on-year.

According to the Austrian National Bank, the difficult economic situation is still impairing the financing of Austrian companies, although the situation has eased slightly since autumn 2009. Bank lending has shown negative growth since the end of 2008, for two main reasons. On the one hand, the drop in investment activity has reduced demand for corporate financing and, on the other hand, with company ratings downgraded in the wake of the downturn, the banks’ lending policies have remained cautious. However, in Q2 of 2010, Austrian banks have, for the first time since the onset of the crisis, eased credit conditions for business loans, at least for larger companies, which had been subject to much tighter loan conditions than smaller enterprises during the crisis. Interest rates for business loans have remained far below the eurozone average, and this should support further economic growth.

Corporate insolvencies have decreased

According to credit agency KSV, 3,196 corporate insolvencies have been registered in the first half of 2010, a 7.9% decrease year-on-year, after a 9.3% increase last year. Related outstanding receivables shrank 20% to €1.6 billion. Those most affected were companies already suffering from high debts and losses before the economic crisis.

Textile [-18.9%], paper/printing [-26.7%], chemicals/pharmaceuticals [-17.1%], food [-14.4%], wood/furniture [-42.5%] and electronics [-19.1%] recorded very high decreases year-on-year in H1 of 2010. Lower decreases were seen in construction [-8.3%], metals/machines [-4.7%], while in the automotive sector business failures increased [2.9%]. As the expected high unemployment rates and predicted slump in private consumption have not materialised, insolvencies in the consumer related sectors such as food, textiles and hospitality were much lower than forecast at the beginning of the year. Overall, Crédito y Caución expects corporate insolvencies to level off in 2010.

The Austrian National Bank forecasts that Austria’s growth will recover 1.6% in 2010 and 1.8% in 2011, after its 3.4% contraction last year. Gross fixed investments will remain weak for the whole of 2010 but exports will rebound in 2010 [4.6%] and 2011 [5.4%]. Private consumption will sustain the recovery this year, but is expected to weaken in 2011 when austerity measures to stabilise public finances take effect.

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