Austria joined the ranks of other euro zone countries with shrinking GDP when its economy declined in the Q4 for the first time in eight years with its exports caught in a “deep recession”, researcher WIFO said on Friday.
WIFO said in its flash estimate of gross domestic product that its regular survey of Austrian companies in January showed sentiment was miserable, especially among large industrials and the car industry, indicating the slump would continue in 2009.
“Companies believe their order situation, especially from abroad, and their business prospects are worse than they have been in a long time,” WIFO said. “A large part of the companies surveyed expect further significant production cuts.”
Austrian companies including Voestalpine, a major supplier to Europe’s dwindling car industry, and brickmaker Wienerberger, exposed to the slump in residential construction, have already warned on earnings this year.
WIFO forecast Austria’s economy to shrink by 0.5% in the full year 2009 in its last economic outlook in December, down from 1.8% growth in 2008. It did not update its outlook on Friday. WIFO revised down its third-quarter GDP growth estimate to zero from 0.1% growth previously.
A 1% quarterly drop in exports was the main factor driving the economy into recession, while domestic consumption, though subdued, still provided some stability with 0.4% quarterly growth, WIFO said. “Economic activity was dampened mainly by the slump of the export-oriented industry in the fourth quarter,” WIFO said in its statement. “The economic downturn also shows in a rapid drop of inflation and a steep increase in unemployment.”
Austria has ridden an export-driven mini-boom in 2006 and 2007, helped by a buoyant German economy -- which devours a third of Austria’s exports -- and by rising trade with emerging Europe, which accounted for another 20% of exports. The Austrian economy grew 3.1% in 2007 and 3.4% in 2006 -- significantly above the euro zone average.
The flash estimate is for real growth, seasonally adjusted and adjusted for the number of working days. Austria accounts for around 3% of the euro zone’s total GDP. (Reuters)