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Austria is a highly prosperous EU member state with a stable, dynamic economy. Its economic system is a free market with a strong social focus, characterised by a high level of social expenditure. Austria's economy is advanced, with a strong service sector and a highly developed industrial sector. The country has a high proportion of medium-sized companies, a strong trend towards organic farming, and a large tourism industry. Austria's economy is also supported by a stable banking system, and the country has a positive attitude towards foreign investment.
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What You'll Learn
- Austria's economy is stable and prosperous, with a strong social focus
- Austria has a highly efficient social security system and strong labour movement
- Austria's economy is diversified, with a strong industrial and service sector
- Austria's business environment is favourable, with a simple company setup process
- Austria's economy is supported by a stable and profitable banking system
Austria's economy is stable and prosperous, with a strong social focus
Austria's economy is dynamic, open, innovative, and internationalized. It is a powerhouse of innovation, technology, and advanced manufacturing, with a unique environment that enables businesses to thrive domestically and internationally. The country has a high number of 'hidden champions', which are extremely successful companies with little global recognition, but which are among the top three worldwide market leaders in their niche sectors. These hidden champions make up a large part of Austria's exports, with 88% of their output being exported.
Small and medium-sized enterprises (SMEs) are the backbone of the Austrian economy, making up 99.6% of all companies in the country. These SMEs are often highly complex and specialized, contributing to Austria's ranking as 10th in the world in terms of economic complexity. The country's economic success can also be attributed to its strong focus on industry, with Austrian industry covering every branch of manufacturing, from basic goods to labor-intensive production of highly processed products.
Austria's service or tertiary sector dominates the economy, constituting approximately 70% of the gross value added (GVA) as of 2020. The largest employers in this sector include sales, hotel and restaurant services, health, and education. The secondary sector, including manufacturing, energy production, and construction, represents 28% of Austria's GVA, while the primary sector of agriculture and forestry makes up only 1.2%.
Austria's economic stability and prosperity are further enhanced by its membership in the European Union, which has reduced its economic dependence on Germany, its traditional main trading partner. The country's access to the European Single Market and its proximity to aspiring EU economies have attracted foreign investors, contributing to its economic dynamism.
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Austria has a highly efficient social security system and strong labour movement
Austria's economic dynamism is underpinned by its highly efficient social security system and strong labour movement. The country's social security system is renowned for its comprehensiveness and contribution-based nature, supporting individuals in gainful employment and their dependents. This system is overseen by the Federal Ministry of Labour, Social Affairs, and Protection, ensuring that social expenditures stood at approximately 29.4% of GDP, one of the highest among OECD nations.
The social security framework in Austria covers a wide range of areas, including prevention, sickness, incapacity for work, maternity, unemployment, old age, death, survivors' pensions, nursing care, and social needs. The system is primarily financed through compulsory income-related insurance contributions, with higher-income earners contributing proportionally more to support those with lower incomes. This principle of solidarity ensures a more equitable distribution of resources.
Austria's labour movement has historically played a significant role in shaping the country's labour politics. The Social Democratic Party of Austria (SDAPÖ), founded in 1889, has been one of the main political forces in the country, particularly among the working class. Despite facing challenges during economic crises and periods of political upheaval, the party has consistently advocated for the rights of workers and implemented ambitious social policies, such as the construction of workers' housing and the introduction of free medical care.
The country's dynamic labour market is characterised by a high demand for skilled workers in sectors like healthcare, IT, engineering, and skilled trades. Austrian companies, particularly in the IT and finance sectors, are responsive to employee expectations, offering flexible work arrangements and remote work options to attract talent. This focus on labour rights and employee welfare contributes to Austria's overall economic dynamism and high quality of life, making it a desirable destination for expatriates and foreign investors alike.
Additionally, Austria's economic landscape is predominantly composed of small and medium-sized enterprises (SMEs), which make up 99.6% of all companies in the country. These SMEs are often highly specialised and contribute significantly to the country's economic complexity, ranking 10th in the world according to the Observatory of Economic Complexity (OEC). This complexity serves as a predictive tool for economic growth and the reduction of income inequality, further enhancing Austria's economic dynamism.
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Austria's economy is diversified, with a strong industrial and service sector
Austria's economy is diverse and dynamic, with a strong industrial and service sector. As a highly developed modern economy, Austria's service or tertiary sector dominates, constituting approximately 70% of the gross value added (GVA) as of 2020. Sales, hotel and restaurant services, health, and education are the largest service sector employers. The industrial sector, or secondary sector, makes up 28% of the GVA and includes manufacturing, energy production and supply, and construction.
Austria's industrial and commercial sectors are characterised by a high proportion of medium-sized companies, which make up 98-99.6% of all companies in the country. These small and medium-sized enterprises (SMEs) are a huge factor in the country's economic success, with many being highly specialised and complex. The country has a strong manufacturing sector, covering every branch, from basic goods to the labour-intensive production of highly processed products. The construction of plants and systems is an increasingly important and export-oriented share of the economy, as is the electronics sector.
Austria is also a leader in the field of hydroelectric power in the European Union, with constant expansion in this area. The country is world-renowned for its arts and crafts, including fine handcrafted items, customised jewellery, ceramics, and glassware. Austria's agricultural sector, or primary sector, is small, making up only 1.2% of the GVA, with only one in thirty Austrians employed in this sector. However, the country is witnessing a strong trend towards organic farming, with a 22% share of organic farms, leading the way among EU member states.
Austria's economy is further strengthened by its membership in the European Union, which has reduced its economic dependence on Germany, its traditional main trading partner. EU membership has also attracted foreign investors, and the country is now a powerhouse of innovation, technology, and advanced manufacturing, with a unique environment that enables businesses to thrive.
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Austria's business environment is favourable, with a simple company setup process
The country's business-friendly environment is characterised by a liberal tax system, with competitive corporate tax rates and no trade or net worth tax. The 2016 tax reform included an increase in the research premium from 10% to 12%, while training offers a tax allowance of 20%. This applies to a company's own R&D, as well as contract research. Austria also offers easy access to over 450 million consumers in the EU, with simplified processes and low bureaucracy making it easier to set up and run a business.
Austria's highly efficient social security system and strong social expenditure make it an attractive destination for businesses. The country has one of the lowest strike rates worldwide due to the economic and social partnership between management and labour representatives, resulting in a stable business environment. Additionally, Austria's skilled workforce and high-quality education system provide a talented pool of employees for companies to draw from.
Registering a company in Austria is straightforward, with the country ranking high for administrative efficiency. The process can take as little as 3-4 weeks, although it is important to note that ongoing compliance with regulations may require additional time and resources. For foreign companies, the Austrian Business Agency provides support and assistance in establishing a presence in the country.
Overall, Austria's favourable business environment, strategic location, and skilled workforce make it an attractive destination for companies looking to expand into European markets. The country's efficient registration process and business-friendly policies contribute to a dynamic and prosperous economy.
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Austria's economy is supported by a stable and profitable banking system
The central bank of Austria, Oesterreichische Nationalbank (OeNB), is a key pillar of the country's banking system. Established in 1816, the OeNB operates independently within the framework of the European System of Central Banks (ESCB) and the Eurosystem. It is responsible for monetary policy, issuing banknotes, and supervising the banking sector. The OeNB aims to maintain price stability and contribute to the stability of Austria's financial system, ensuring smooth payment systems, managing foreign exchange reserves, and compiling financial statistics.
The Austrian banking system has a strong focus on financial stability and security. The Financial Market Authority (FMA), established in 2002, is the primary regulatory body for the financial market. It supervises banks, insurance companies, pension funds, and other financial institutions, working closely with the OeNB to maintain a stable and reliable financial environment. The FMA's role is crucial in ensuring the integrity and transparency of Austria's financial market, providing confidence to investors and businesses alike.
Austria's membership in the European Union (EU) has also contributed to the strength of its banking system. Adopting the EU's single currency, the euro, in 1999, and completing the transition from schillings in 2002, further integrated Austria into the European economic landscape. This move enhanced the country's economic ties with other EU member states and attracted foreign investors, who valued Austria's access to the European Single Market.
Additionally, Austrian banks have expanded their global operations, working with larger U.S. corporations and investing in Eastern European countries. However, the country's banks also faced challenges during the European economic contraction in 2009, requiring government bailouts and nationalisation of some institutions. Overall, Austria's banking system is a critical component of its dynamic economy, providing the financial infrastructure necessary for the country's economic success and stability.
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Frequently asked questions
Austria has a highly developed social market economy, with the country being one of the fourteen richest in the world in terms of GDP per capita. The economy is dominated by the service or tertiary sector, which constitutes approximately 70% of the gross value added, or GVA, as of 2020. Austria's industrial and commercial sectors are characterised by a high proportion of medium-sized companies.
Austria has a strong and stable economy, with a constant improvement in competitiveness rankings. The country has a high level of economic complexity, with strong industrial capacity and well-developed services ranging from tourism to professional services. Austria also has a strong social security system, with social expenditure standing at roughly 29.4% of GDP.
Austria is a politically and socially stable country, with a high quality of life and a high-quality education system. The country has a positive attitude towards foreign investment, and it is easy to set up a business in Austria. Additionally, Austria has a highly educated, skilled, and motivated workforce.
