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- GDP (PPP):
- $352.0 billion
- 3.1% growth
- 1.3% 5-year compound annual growth
- $41,822 per capita
- Inflation (CPI):
- FDI Inflow:
Austria’s economic freedom score is 71.8, making its economy the 25th freest in the 2013 Index. Its score is 1.5 points better than last year due to improved scores for government spending, business freedom, and investment freedom. Austria is ranked 14th out of 43 countries in the Europe region, and its overall score is well above the regional and world averages.
Though comparatively small, the Austrian economy is highly globalized and resilient. It recovered quickly from the recent global financial crisis and continues to support high levels of prosperity. Openness to global trade and investment is firmly institutionalized and supported by a relatively efficient entrepreneurial framework. Austria has a strong tradition of reliable property rights protection, and the legal system is transparent and evenly applied. Effective anti-corruption measures are in force.
The greatest hindrance to Austria’s entrepreneurial vitality continues to be the disregard, even dismissal, of the concept of limited government. Though the corporate tax rate is comparatively low, individuals face a burdensome income tax rate of 50 percent and various other indirect taxes. Austria’s fiscal condition compares favorably to its eurozone neighbors, but public spending has become excessive and unsustainable.
After the 2008 parliamentary elections, the center-left Social Democrats formed a governing coalition with the center-right Austrian People’s Party, and Social Democrat Werner Faymann became chancellor. The Austrian government has gradually relinquished control of formerly nationalized oil, gas, steel, and engineering companies and has deregulated telecommunications and electricity. The economy has large service and industrial sectors and a small but highly developed agricultural industry. Austria joined the European Union in 1995, and the EU is the destination for 80 percent of Austria’s exports. With such a large percentage of exports dependent on the EU, the eurozone crisis has affected the Austrian economy, which continues to grow but at a slow pace.
The rule of law is respected, and the judiciary is independent. Contractual agreements are enforced effectively, and the protection of intellectual property is strong. Instances of corruption have been prosecuted effectively. A high degree of transparency is a key institutional strength, and revamped criminal regulations against corruption have permitted continued effective enforcement of rules against bribery.
The top income tax rate is 50 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax (VAT) and a tax on real estate transfers. The overall tax burden is 42 percent of total domestic income. Government spending amounts to 50.5 percent of total domestic output, leading to a higher budget deficit at 4.6 percent of GDP and public debt equivalent to 72.2 percent of GDP.
An efficient regulatory framework facilitates business innovation and productivity growth. Nonetheless, the absence of major regulatory reforms in recent years has undermined Austria’s international competitiveness. There is no nationally mandated minimum wage, but the cost of fringe benefits is among the highest in the world. Average inflation has risen slightly but remains below the averages for the eurozone and the EU.
Austria’s trade policy is the same as that of other members of the European Union, with the common EU weighted average tariff rate standing at 1.6 percent. However, myriad non-tariff barriers increase the cost of trade. The investment regime is efficient, and there are no controls on currency transfers, access to foreign exchange, or repatriation of profits. The financial sector remains competitive and stable, offering a wide range of financial services.