The lack of economic dynamism in the Eurozone, the US and some major emerging markets has had a dampening effect on growth forecasts for the Austrian economy as a result of its traditionally strong foreign trade links. Notwithstanding the fact that the demand for exports and investment in equipment had an invigorating effect, private consumption decreased by the end of 2015. This is added to an increasingly tight job market with an unemployment rate of 9.1% in January 2016. The International Monetary Fund (IMF) sees no signs of a recovery and in its winter forecast maintains a growth rate of 1.7% for the Austrian gross domestic product for both 2016 and 2017.
The low oil price continued to provide relief to the budgets of companies and private households and helped to keep inflation low. However, no long-term fall in energy prices is expected. The positive trends expected in the first months of 2016 relate mainly to increased demand in purchasing and the intermediate input sections of the industry. The more positive expectations are not, however, expected to take immediate effect in the consumer goods industry.
As part of a slight recovery in the Austrian economy in the calendar year 2016 based on the manufacturing industry index, it is expected that it will be possible to achieve values again that correspond approximately to the average for the past few decades. At the beginning of the year, a tax reform came into force in Austria which it is hoped will somewhat reinvigorate private demand that has been moderate over the past few months.
The lasting low interest rates will continue to present a challenge for the life insurance business in both Austria and Europe, as well as in other parts of the world. The Austrian banking system is currently in a major restructuring phase. This involves firstly a reduction in the number of banks and branches, and secondly the further increasing of the capital base required by the international regulatory authorities.
The public budget deficit remained within the limits in 2015 at 2.0% of GDP. Despite the continuing high level of government debt of 86.7% and the doubts expressed by the EU commission as to whether the budget targets set can really be achieved, Austria still has an “AA+” rating on the international capital markets (Standard & Poor’s). During the dismantling of HETA last year, initial steps were put into place that were intended to have a positive effect on government debt in years to come. Nevertheless, overcoming the burden of debt will remain one of Austria’s main challenges, alongside unemployment and immigration issues.
The Austrian Insurance Association (VVO) expects premium volume to rise to EUR 17.5 billion in 2016, representing a year-on-year increase of 0.3%. While property and casualty insurance is expected to develop in a constant manner at 1.9%, life insurance business, which grew by only 0.2% in 2015, is expected to see a decline of 2.4% in the coming year. In health insurance in Austria, stable premium growth of 3.0% is expected for 2016.