2013-01-15 13:12:19 - Austria Business Forecast Report Q1 2013 - a new country guide report on companiesandmarkets.com

Our view that Austrian growth would prove weak in 2012 continues to play out, and retain our below consensus forecast for subdued real GDP growth of just 0.4% over the course of this year. Stimulatory policy by the European Central Bank and other major central banks should aid a modest pickup in Austrian growth towards the end of the year, but this is unlikely to be particularly strong given the depressed conditions that will continue to prevail through much of the eurozone. We forecast the Austrian economy to expand by just 0.9% in 2013.

Austria is likely to retain a hawkish stance towards the policy response enacted by European policymakers in response to the ongoing sovereign debt crisis over the months

 

 

ahead. However, it is likely to compromise in order to ensure regional financial stability, but will do so only upon compromise and leadership by Germany. Indeed, although a hawkish stance is likely to be adopted by the Austrian government in any negotiations, its own interests are best served if eurozone financial and macroeconomic stability is restored.

Key Risks To Outlook

Should a political solution to the eurozone´s burgeoning debt crisis continue to prove lacking, it could have a severely negative effect on economic confidence in the region, which would result in a more acute economic downturn in the region. This would undoubtedly push Austria back into recessionary territory as domestic and external economic conditions would sour.

Given their heavy exposure to Eastern Europe, the broad economic slowdown in the region risks a proliferation in non-performing loans and declining asset quality for Austrian banks. This could lead to a severe decline in credit offered by Austrian banks both at home and abroad, which would exacerbate the economic slowdown already under way.

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