Austria: A High-Risk Country?

Austria has been deemed a high-risk country by its neighbour Germany in the past, due to high numbers of COVID-19 cases. Austria's capital, Vienna, was declared a high-risk Coronavirus zone by Germany's Robert Koch Institute (RKI) in December 2021 and again in December 2024. However, Germany removed Austria from its high-risk list on Christmas Day 2021. Austria has also faced economic risks, with a recession in 2023 and a projected prolonged recession in 2024. In November 2024, Austria's Health Ministry declared the entire country a high-risk area for avian influenza (bird flu), implementing stricter safety measures.

Austria's avian influenza risk

Avian influenza, or bird flu, is a highly contagious viral disease that occurs mainly in poultry and wild water birds. It can be further categorised into highly pathogenic avian influenza (HPAI) and low pathogenic avian influenza (LPAI) based on the severity of the disease in birds. HPAI is fatal to poultry and can wipe out entire flocks within days, while LPAI strains typically cause mild or no symptoms.

In Austria, several outbreaks of HPAI subtype H5N1 have been confirmed in wild birds, poultry farms, and hobby farms since September 2024. The risk of transmission from wild birds to poultry flocks remains high. As a result, poultry farmers must implement strict biosecurity measures, such as separating ducks and geese from other poultry and preventing contact between their animals and wild birds using nets and roofs.

To prevent the spread of avian influenza, Austria has designated 25 districts in Lower and Upper Austria, Styria, Salzburg, Carinthia, and Burgenland as high-risk areas, with stricter safety measures in place. Farms with more than 50 animals in these districts are required to keep their livestock indoors. Additionally, outdoor feeding is prohibited throughout the country, and water from reservoirs accessible to wild birds cannot be used.

The Austrian authorities are taking proactive measures to contain the spread of avian influenza, but the risk remains high, impacting the country's poultry industry and public health.

COVID-19 high-risk area

The classification of a country or area as a COVID-19 high-risk area has implications for travel and quarantine restrictions. While there is no universally accepted definition of a COVID-19 high-risk area, several criteria are typically considered.

One key factor is the incidence rate of new infections per 100,000 inhabitants over a specified period, typically ranging from 7 to 28 days. Different countries and organizations use different thresholds for this metric, with some considering areas with more than 50 cases per 100,000 inhabitants in the past 14 days as high-risk, while others use a higher or lower threshold.

Another important criterion is the positivity rate, which is the ratio of positive samples to the total number of samples tested. A high positivity rate indicates that community transmission may be more widespread than the incidence rate alone suggests. Some countries use a combination of incidence and positivity rates to determine high-risk areas.

Other factors that may be considered include community transmission rates and the availability of satisfactory laboratory testing.

The determination of COVID-19 high-risk areas is dynamic and subject to change as the pandemic evolves. The classification may also vary between countries, as different countries may use different criteria and thresholds.

In the context of Austria, Germany classified Austria as a COVID-19 high-risk area in November 2021 due to an increase in the number of COVID-19 cases, specifically in Vienna. This classification resulted in quarantine requirements for people travelling from Austria to Germany unless they were vaccinated or had recovered from COVID-19.

Austria's economic recession

Austria's economy is facing a period of recession, with a projected GDP decline of 0.6% in 2024, marking the second consecutive year of economic downturn. This recession is characterised by declining investment, lower exports, and weak private consumption, which are hindering the country's economic activity. However, it's important to note that Austria has a well-developed market economy and is expected to recover in 2025.

Several factors contribute to Austria's economic recession. Firstly, there has been a slump in consumption and investments, leading to a decrease in output for two consecutive quarters. This includes a decline in industrial and construction output, as well as household spending. Additionally, exports of goods to Germany, Austria's largest trading partner, have significantly decreased. This weakness in exports has been prolonged, impacting Austria's overall economic performance.

Another factor is the investment slump and weak demand for capital goods and machinery. Companies' profits have deteriorated due to the recession, increasing wages, and rising commodity prices, which will continue to negatively affect investment in machinery and equipment in 2025. High inflation, which eroded consumer confidence, has also played a role in the recession. While inflation is projected to decrease in 2025 and 2026, it has contributed to a significant increase in the saving rate and impacted economic growth.

The recession is also affecting the labour market, with the unemployment rate expected to rise moderately. In 2025, the unemployment rate is projected to increase to 5.3%. However, this rise in unemployment is mitigated by large cohorts reaching retirement age and labour supply increases due to migration and the alignment of women's retirement age with men's. Nominal wages are forecast to increase in 2024 and 2025, resulting in further rises in real wages.

The Austrian government's budget deficit is also a concern. It is expected to increase from 2.6% of GDP in 2023 to 3.6% in 2024, driven by indexation of specific expenditure positions to inflation and additional spending in areas like childcare, health, and climate initiatives. The deficit is projected to continue rising in 2025, reaching 3.7% of GDP, due to increased spending on pensions and social benefits.

Austria's banking sector exposure

Austria's banking sector is exposed to central, eastern, and south-eastern European (CESEE) countries, with about half of the total profits generated in the region and a quarter of Austrian banking system assets located there. This exposure is a concern, as it increases the vulnerability of the Austrian banking sector to economic downturns in these countries.

The Austrian banking system is a universal banking system, which allows for synergy between different banks and offers a high degree of risk mitigation and flexibility. The sector is highly developed, with nearly 600 banks and 3,600 branches, making Austria the European country with the highest density of banks. The biggest banks in the country are joint-stock and private banks, as well as Raiffeisen (cooperative banks) and saving banks.

The Austrian banking sector is one of the most strictly regulated sectors in the country due to its structural importance for the functioning of the economy. The European Union (EU) plays a significant role in driving change in banking legislation and setting regulatory targets. The Austrian Financial Market Authority (FMA) and the Austrian National Bank (OeNB) work together to regulate and supervise the sector, ensuring its proper functioning and resilience.

The high regulatory requirements and strict supervision measures in the Austrian banking sector can be challenging for smaller credit institutions, leading to market consolidation. However, the legal framework results in a resilient industry that is well-prepared for future crises. The regulatory environment in the EU is becoming increasingly harmonized, and Austrian banks have strong connections with decision-makers, ensuring they remain competitive.

Overall, Austria's banking sector exposure to CESEE countries is a key feature of its economy, and the universal banking system and strict regulations contribute to its stability and resilience.

Political shift to the right

Austria's political landscape has traditionally been dominated by the centre-right Austrian People's Party (ÖVP) and the centre-left Social Democratic Party of Austria (SPÖ). However, in recent years, the country has witnessed a notable shift towards the right, with the Freedom Party of Austria (FPÖ) gaining traction and emerging as a significant force in national politics.

The FPÖ, founded in 1955 as a successor to the Federation of Independents, is a right-wing populist party known for its nationalist and anti-immigration rhetoric. The party gained support under the leadership of Jörg Haider, who took over in 1986, and went on to attract approximately 27% of the vote in the 1999 elections. Despite a dip in the 2002 elections, the FPÖ made a strong comeback, becoming a junior partner in a coalition government with the ÖVP in 2017. However, this coalition was short-lived due to a political scandal involving the FPÖ's leader.

In the September 2024 general election, the FPÖ's hard-right stance and illiberal, authoritarian agenda propelled it to victory, winning 29% of the vote. The party's success can be attributed to several factors, including its ability to tap into societal concerns over migration, crime, and security, as well as the psychological impact of the COVID-19 pandemic and associated restrictions. The FPÖ effectively leveraged conspiracy theories and stoked fears of "elites" and "globalists", appealing to Austrians' worst instincts and contributing to a growing sense of ethnocentric patriotism.

The shift towards the right in Austria has had significant implications for the country's democracy and political stability. The FPÖ's extremist agenda and normalisation of conspiracy theories have fostered a social climate that misrepresents reality and contributes to a sense of cultural panic. Additionally, the party's influence on the ÖVP has led to the adoption of more hard-line stances on migration, further exacerbating the right-wing shift.

The rise of the FPÖ and the country's overall political shift to the right have raised concerns about the potential for an authoritarian regime in Austria, similar to what has been observed in Hungary and Slovakia. The responsibility now falls on the country's political leaders to prevent this outcome and find long-term solutions to counter the growing influence of right-wing extremism.

Frequently asked questions