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UNICREDIT BANK AUSTRIA ECONOMICS & MARKET ANALYSIS AUSTRIA

2018

Review and Preview 2019

Focus Austria

UniCredit Research Page 2

International Environment

2017 2018 2019

(GDP, change in %)

Euro zone 2.5 2.2 1.9

Germany 2.2 2.0 1.9

France 2.3 1.8 1.6

Italy 1.6 1.3 1.2

Spain 3.1 2.7 2.1

UK 1.8 1.2 1.3

USA 2.3 2.7 2.3

Japan 1.7 1.1 1.0

Forecast

2015 2016 2017

(annual average)

USD per euro 1.11 1.11 1.13

CHF per euro 1.07 1.09 1.11

GBP per euro 0.73 0.82 0.88

JPY per euro 134.3 120.3 126.7

Oil (USD/barrel) 53 45 55

10y Gov. bond (A) 0.75 0.37 0.56

3m Euribor -0.02 -0.26 -0.33

Source: UniCredit Research

Author: Walter Pudschedl

Imprint Published by UniCredit Bank Austria AG Economics & Market Analysis Austria Rothschildplatz 1 1020 Vienna Telefon +43 (0)50505-41957 Fax +43 (0)50505-41050 e-Mail: econresearch.austria@unicreditgroup.at

as of August 2018

Economic boom in Austria

■Economic growth rose to 3% in 2017 – with higher momentum than in the eurozone for the first time in three years With an economic growth of 3% in 2017, the Austrian economy is back in the fast lane in a European comparison. The acceleration compared to the weaker previous years is primarily attributable to the fact that the momentum of do-mestic demand caught up with the rest of the eurozone and is now even ex-ceeding it slightly. In addition, the strongly export-oriented economy was given an important growth stimulus by the revival of global trading in 2017.

■Cyclical peak has passed – pace of growth remains high The cyclical peak has passed; sentiment and early indicators have now stabi-lized at a lower level. The excellent export environment has lost its shine since the beginning of 2018. Domestic demand is also slowing down. We are assum-ing an increase in GDP by 2.8% for 2018. As the economic cycle moves towards its end and global support eases off, this means that we can expect a flattening of economic growth at a solid 2% for 2019.

■The labor market benefited from a good economic cycle in 2017 – improve-ment trend tapers off slowly in 2018/19 The acceleration of the growth in employment in 2017 to almost 2% compared to the previous year has facilitated a decline in the unemployment rate for the first time since 2011. After reaching an average of 9.1% in 2016, the unem-ployment rate fell to 8.5% in 2017, and according to Eurostat it fell from 6 to 5.5%. In fact, in the first half of 2018, the positive trend continued even more strongly. The improvement in the situation on the labor market will continue, supported by the good economy, but at a slower pace. For 2018, we expect an unemployment rate of 7.7% (or 4.8%) and for 2019 a rate of 7.6% (4.7%).

■Inflation climbed to 2.1% in 2017 – inflation rate remains at around 2% in 2018/19 After just 0.9% in 2016, the rate of inflation in Austria rose to an annual average of 2.1% in 2017. The upturn was primarily down to the increase in the crude oil price. With an average of 1.9% in the first half of 2018, inflation was slightly lower than in the previous year. However, that trend has now reversed. In June, the rate of inflation rose to 2% year-on-year. The upward trend will continue in the months ahead. The combination of higher oil prices and less support due to the exchange rate will increase inflation to an average of 2.2% in 2018.

■Normalization of monetary policy initiated – no interest rate hike expected at least until late summer 2019 The higher oil price, but also the economic recovery, which influences wage dy-namics, will ensure an upward trend in inflation in the Eurozone as a whole in the months ahead. The expected increase in inflation to an average of 1.7% in 2018 will enable the ECB to introduce the normalization of monetary policy. The ECB will allow the assets purchase program to expire as expected at the end of 2018 and has announced that it will only consider changing interest rates after the end of the summer of 2019

2016 2017 Rev.1) 2018 Rev.1) 2019

GDP (real, change in %) 1.5 3.0 2.8 2.0

Inflation (CPI, in %) 0.9 2.1 2.2 1.9

Unemployment rate (in %) 9.1 8.5 7.7 7.6

1) Revision since last report

Focus Austria

UniCredit Research Page 3

The economic situation at a glance

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Real change in %

GDP 1.8 2.9 0.7 0.0 0.8 1.1 1.5 3.0 2.8 2.0

Private consumption 1.0 1.3 0.5 -0.1 0.3 0.5 1.5 1.4 1.8 1.4

Public consumption 0.0 0.1 0.1 0.8 0.8 1.5 2.1 0.9 0.7 0.9

Gross fixed capital formation*) -2.6 6.6 0.9 1.6 -0.7 1.2 3.7 4.9 4.7 3.0

Investments in plant and machinery -3.0 9.8 -0.3 1.7 -1.6 1.5 8.6 8.2 6.3 3.5

Investments in construction -4.4 2.8 1.8 -1.6 -0.1 1.1 1.1 2.6 2.3 2.0

Exports 13.1 5.9 1.4 0.6 3.0 3.1 1.9 5.6 4.0 3.8

Imports 12.0 6.0 0.9 0.7 2.9 3.1 3.1 5.7 3.3 3.6

CPI (change in %) 1.9 3.3 2.4 2.0 1.7 0.9 0.9 2.1 2.2 2.0

HCPI (change in %) 1.7 3.6 2.6 2.1 1.5 0.8 1.0 2.2 2.3 2.0

Current account (in EUR bn) 8.4 5.1 4.7 6.3 8.2 6.6 7.5 7.0 8.5 9.4

Current account (in % of GDP) 3.3 1.6 1.5 1.9 2.5 1.9 2.1 1.9 2.2 2.3

Employment in ´000s**) 3,260 3,323 3,370 3,392 3,416 3,449 3,502 3,573 3,655 3,700

change in % 0.8 1.9 1.4 0.6 0.7 1.0 1.6 2.0 2.3 1.2

Unemployment rate (nat. def.) 6.9 6.7 7.0 7.6 8.4 9.1 9.1 8.5 7.7 7.6

Unemployment rate (EU def.) 4.8 4.6 4.9 5.4 5.6 5.7 6.0 5.5 4.8 4.7

Unemployed (annual average in 1,000) 251 247 261 287 319 354 357 340 314 310

General gov. balance (in % of GDP) -4.4 -2.6 -2.2 -2.0 -2.7 -1.0 -1.6 -0.7 -0.5 0.0

Public-sector debt (in % of GDP) 82.7 82.4 81.9 81.3 84.0 84.6 83.6 78.3 74.7 71.9

Nominal GDP (in euro bn) 296 310 319 324 333 344 353 370 388 403

*) excluding changes in inventory **) excluding persons drawing maternity benefits, military service and training

Source: UniCredit Research

■Budget targets eased thanks to a good economic cycle – no more new debt planned from 2019 The budget deficit was reduced significantly to 0.7% of GDP in 2017, supported by strong economic growth. The draft budget for 2018 provides for a general government budget deficit of 0.4% of GDP. 2019 is expected to bring a balanced budget for the first time since the 1970s. The declining trend in public borrow-ing in relation to the economic output that took effect in 2016 is expected to continue in the years ahead. For the end of 2019, we expect a decline to 72% of GDP, also supported by the further asset reductions at the Bad Bank HETA. The previous peak of almost 85% of GDP was reached in 2015.

■Banking markets gain in momentum – loans and deposits growing signifi-cantly Alongside the economic recovery, the demand for credit increased in Austria in 2017, and also significantly in the first half of 2018. The entire lending volume increased as an annual average by 2.2%, with corporate loans largely responsi-ble for the gain in momentum. Despite the generally low interest rates, total deposits in Austria are increasing sharply and the pace of growth did not fall in corporate investments or private households in the first half of 2018. The on-going favorable economic prospects are expected to ensure further increases in the demand for credit in the second half of 2018 and 2019. On the investment side, the low interest environment will continue to dominate. The investments are expected to be focused on very short-term deposits.

Focus Austria

UniCredit Research Page 4

Cyclical peak in Austria passed – challenges increasing

■ Increase in GDP of 3% brings Austria back to the fast lane in Europe in 2017

■ Cyclical peak passed, but growth stabilizing solidly

■ Domestic demand remains the driving force, despite the slight loss of momentum in investment growth

■ Protectionist tendencies in trading and geopolitical tensions result in falling support from foreign demand

■ We expect economic growth of 2.8% for 2018 and a slowing economy with an increase in GDP of 2% for 2019

■ Focus: Are protectionist measures putting a strain on Austria’s economy?

Economic growth of 3% in 2017 – stronger than in the eurozone for the first time in three years

Consumption and capital expendi-ture resulted in economic momen-tum speeding up in Austria

Austria back in the fast lane in 2017

With economic growth of 3%, the Austrian economy is back in the fast lane in a Euro-pean comparison for the first time since 2017. While the Austrian economy has con-sistently grown at a rate considerably above average since the introduction of the euro through to the financial crisis and also immediately afterwards in the phase of the eco-nomic upturn, the momentum in Austria since the beginning of the economic recovery after the euro crisis in the middle of 2013 until the end of 2016 has continually been below the growth trend in the eurozone. This was primarily due to the comparatively slow development of domestic demand. On average in these three years, domestic de-mand in the eurozone provided almost one percentage point more growth per year than in Austria. Nearly two-thirds of this are a consequence of the very weak economic mo-mentum during these years.

The acceleration of economic growth in 2017 in Austria is mainly attributable to the fact that the momentum of domestic demand caught up with the rest of the eurozoneand is now even exceeding it slightly. The stimulus from the German tax reform in 2016, in combination with the improvement in the situation on the labour market have led to a permanent improvement in consumer sentiment, which is reflected in persis-tently high growth in the consumer segment. Furthermore, the improvement in senti-ment and strong growth in orders have helped break the investment slump and trig-gered the investment boom supported by the good liquidity situation and low interest level. A further important growth stimulus for the strongly export-oriented Austrian economy in 2017 was the revival of global trading.

AFTER THREE WEAKER YEARS, GROWTH MOMENTUM IN AUSTRIA IS NOW BACK ABOVE THE EUROZONE LEVEL

Source: Statistik Austria, Eurostat, UniCredit Research

-6

-4

-2

0

2

4

6

2000 2002 2004 2006 2008 2010 2012 2014 2016

GDP (real, yoy in %)

Euro area Austria

-1

0

1

2

3

A EA A EA A EA A EA

Privateconsumption

Publicconsumption

Investment

Net exports2014 2015 2016 2017

GDP growth in comparison (contribution of demand components to GDP change in %)

Focus Austria

UniCredit Research Page 5

Private consumption gaining in mo-mentum since the 2016 tax reform

Easing on the labour market en-sures ongoing tailwind

Domestic demand as the driving force: Recovery of private consumption continues

With an increase of 1.4% in 2017 compared to the previous year, private consumption reflected the strong rate of expansion set in motion by the 2016 tax reform, which, after almost four years of virtual stagnation, resulted in an increase of 1.5%. The levelling off of the positive effects of income tax reform was balanced out on the one hand by the improvement in consumer sentiment, which is reflected in increased consumer spend-ing, which was apparent in the reversal of the rising trends in the savings rate, among other things. The savings rate fell to an all-time low of 6.4% in 2017. On the other hand, the improvement in the situation on the Austrian labour market driven by the economic situation, which was reflected in very high employment dynamics of around 2% on a year-on-year basis, provided an ongoing stimulus for private consumption even without new fiscal stimuli.

We assume that private consumption will again show strong growth momentum in 2018. In the first half of 2018, the tailwind from the high employment dynamics brought about by the good economic situation was even stronger in fact. The slight ac-celeration in wage growth also provided further support. After an increase by 1.5% on average in 2017, wage rates are showing a clear upward trend with a year-on-year in-crease of more than 2% in the first months of 2018. In addition, we assume that the savings rate will still show a slightly declining trend in 2018. Driven by the good situa-tion on the labour market and the above-average sentiment among consumers, de-mand for durable consumer goods will remain strong. New passenger car registrations rose more than 3% year-on-year in the first half of 2018. However, comparatively high inflation continued to limit support for private consumption. In comparison to the aver-age performance in the eurozone and also in neighbouring Germany, inflation is result-ing in lower real wage increases, which will somewhat limit the momentum of con-sumption growth during the year, especially as the high employment dynamics will not continue on this scale. However, private consumption, which accounts for a share of around 50% of the total economic output, will remain one of the most important pillars supporting economic growth with an expected year-on-year increase of 1.8% in 2018.

GOOD SENTIMENT REFLECTED AMONG AUSTRIAN CONSUMERS SINCE THE 2016 TAX REFORM

Source: Statistik Austria, Eurostat, UniCredit Research

High investment dynamics promote economic growth in Austria for the third year in a row

Investment boom goes into overtime

In addition to consumption, a strong expansion of capital expenditure also provided plenty of support for economic growth. In 2017, the gross fixed capital formation rose by 4.9% year-on-year. Thus the strong investment cycle has now lasted for a third year in a row after a severe investment slump between 2012 and 2014, despite low interest rates. From the middle of 2015, the investment backlog began to break and the Aus-trian business sector began to make deferred replacement investments. Only thereafter did the investment boom pick up speed due to extension investments.

-2

-1

0

1

2

3

2010 2011 2012 2013 2014 2015 2016 2017 2018

Consumer sentiment(standardized)

Germany Austria Euro area

-0.5

0.0

0.5

1.0

1.5

2.0

Private consumption(real, yoy in %)

2000-2017 average

Focus Austria

UniCredit Research Page 6

Good prospects for the continua-tion of the investment boom at a slightly lower tempo

The investment boom is especially evident in the development of the investments in equipment, which increased by 8.2% year-on-year in 2017, but this meant that the mo-mentum from the previous year could not quite be achieved once again. This is due to the noticeable decline in the growth of capital expenditures in vehicles, which halved to a still impressive level of 6.2% in 2017. In contrast, capital expenditures in machinery and equipment posted an increase in momentum in 2017 to 8.9% (2016: 6.7%). After a long period of stagnation, construction investments also increased substantially again for the first time in 2017. Both in residential buildings and other buildings, there was a significant upward trend with an average increase of 2.6%.

Due to the length of the investment cycle, the probability of investment growth weak-ening in 2018 is clear. After the increase of 5.3% in the first half of 2018, the real mo-mentum for the full year of 4.7% will be nearly as high as in the previous year. Sup-ported by the low interest rates and high average liquidity, Austrian companies continue to plan a strong expansion of investment activities for 2018. In particular, the metal in-dustry, chemical industry and building suppliers are very optimistic about expanding their production capacities due to strong demand. This is borne out by the currently high utilisation of local industry, which is around 2 percentage points above the long-term average.

AT 23.5%, AUSTRIA HAS THE FOURTH HIGHEST INVESTMENT RATIO IN THE EU, AND THE BOOM CONTINUES

Source: Statistik Austria, Eurostat, UniCredit Research

Exporting momentum accelerated strongly year-on-year to 8.2% in 2017

Global trade fuels Austrian foreign trade

The acceleration of global trading in 2017, supported by the synchronous, increasingly investment-driven economic upswing in industrialised and emerging markets, has given demand for Austrian export products a strong boost. The goods exports rose by a nominal amount of 8.2%, reaching EUR 141.9 billion in 2017. The goods export quota climbed to 38.4% of GDP. Due to strong consumption and investment demand, the Austrian econ-omy’s demand for imports even increased by 8.8% to EUR 147.6 billion in 2017.

While trade with the most important partner Germany (share of exports over 30%; share of imports almost 37%) developed slightly below average, foreign trade with the countries directly below it on the list – the US, Italy and France – increased. Foreign trade with the emerging markets in Central Eastern Europe, which take almost 20% of Austrian exports, also increased at a disproportionate level, supported by the economic upward trend in the region.

The trade deficit was more than balanced out by a surplus in services, propped up by tourism, in 2017. A new record of 144.5 million overnight stays contributed to this. With a surplus of 1.9% of GDP, the current account balance was still slightly below the value of the year before in 2017.

0

5

10

15

20

25

30

CZ SD EE AT IE BE

RO FI FR HU

MT SK CY EA ES DK

DE NL

EU LV HR

BG LT SI PL IT LX UK PT EL

Investment ratio in the European Union(2017 in %)

-2.6

6.6

0.91.6

-0.7

1.2

3.74.9 4.7

3.0

-6

-4

-2

0

2

4

6

8

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Equipment

Buildings

Gross fixed capital formation

Gross fixed capital formation (real, yoy in %, with contributions of investments in equipment and buildings)

Focus Austria

UniCredit Research Page 7

After a break for a year, foreign trade once again made a positive contribution to the growth of the Austrian economy in 2017. Around 15% of the GDP increase was down to net exports. Foreign trade should provide a net contribution to economic growth again in 2018. Due to a more moderate demand for imports in view of the slight slowdown in the investment momentum, it could even make a somewhat greater contribution than in 2017. The level of growth will remain high in 2018, but will continue to lose more in mo-mentum over the course of the year. In our opinion, there are three reasons for this. Firstly, the UniCredit Global Leading Indicator, which combines a number of macroeco-nomic early indicators from different countries and sectors to form a number, already in-dicates a slowdown in global trade. Secondly, the headwind due to the stronger euro in relation to the US-Dollar compared to the previous year will become noticeable. After around USD 1.13 for EUR 1 on average in 2017, the downward convergence of the US dollar will continue towards equilibrium. At the end of 2018, the exchange rate of the euro compared with the US dollar is expected to increase to 1.20, supported by rising portfolio inflows and the decrease in risk assessment for Europe. Thirdly, the concerns about possible consequences of the protectionist policy of the USA are increasing, even though we believe the effects on the Austrian economy will be manageable at the cur-rent level. However, a vicious circle is impending of reciprocal protectionist measures, which are likely to have a negative impact on the momentum of global trade. Global eco-nomic growth is likely to suffer as a result of this, which would not be without a noticea-ble impact on the growth prospects for Austrian foreign trade.

IN SPITE OF HIGH EXPORTS, THE TRADE DEFICIT ROSE IN 2017, WITH THE CURRENT ACCOUNT SURPLUS LOWER

Source: Statistik Austria, Eurostat, UniCredit Research

Export growth burdened by de-creasing momentum in global trad-ing, strength of the euro and con-cerns about increasing protection-ism

Industrial and consumer sentiment reach their peak since the financial crisis, but export environment loses its shine a little

The good times are not over – but cyclical peak has passed and risks are on the rise

The jubilant mood in the domestic economy is continuing in the summer of 2018. The UniCredit Bank Austria economic indicator stands at 3.6 points in July – posting a de-cline for the seventh month in a row from the all-time high at the end of 2017, but is still above average in a long-term comparison.

The cyclical peak has now passed. The excellent Austrian export environment lost its shine somewhat in the first half of 2018. The indicator for the global industry senti-ment weighted with the domestic foreign trade shares has clearly fallen. The upward trend in the key markets of Germany and France and in some Eastern European coun-tries in particular has ended. Nevertheless, the domestic industry remains optimistic in view of the high volume of orders.

10,000

10,500

11,000

11,500

12,000

12,500

13,000

13,500

01/15 07/15 01/16 07/16 01/17 07/17 01/18

Exports, s.a.Exports, trendImports, s.a.Imports, trend

Export and import volume (monthly values, in EUR mn)

0.6 0.1 -0.3-1.0 -1.0

3.0 3.12.8 3.9 4.2

-0.7

-0.1

0.2

0.3 0.2

-0.9-1.0 -0.8

-1.0 -1.0

1.9 2.1 1.92.2 2.3

-2

-1

0

1

2

3

4

5

-2

-1

0

1

2

3

4

5

2015 2016 2017 2018 2019

Current account balance(in % of GDP)

Goods Services

Primary income Secunary income

Current account

Focus Austria

UniCredit Research Page 8

ECONOMIC SENTIMENT HAS PASSED ITS PEAK; ECONOMIC GROWTH IS SLOWING DOWN

Source: Statistik Austria, Eurostat, UniCredit Research

Positive outlook for 2018 and 2019 with a somewhat slower pace of growth

The optimism of domestic consumers is also high in view of the ongoing improvement in the situation on the domestic labour market. The economic sentiment in Austria con-tinuously improved up to the beginning of 2018. However, since spring, the upward trend has abated and sentiment has become more inconsistent. In the service sector, sentiment is in fact slightly depressed at this time.

Over the rest of the year, the pace of growth of the Austrian economy is expected to slow down slightly. Firstly, the economic tailwind generated by foreign demand appears to be easing off. The effects of the strength of the euro compared with the US dollar as well as the rising tension over trade policy are expected to become apparent. The inter-est-rate hike in the USA could have an unfavourable effect on the flow of capital in the emerging markets and their pace of growth. Secondly, domestic demand is also ex-pected to lose momentum. Investment dynamics in particular are about to slow down. The investment boom is already in its fourth year. The backlog that previously existed has therefore now been covered. However, the high degree of utilisation of the domestic economy reflects a strong momentum in investments in equipment due to capacity ex-pansion in order to cover the high demand. In contrast, thanks to the strong growth in employment and more movement in wages, there is still plenty of stimulus from pri-vate consumption.

Despite this, at 2.8%, economic growth in Austria will still be very strong in 2018 and will be above the long-term average for the second year in a row. In addition, as in 2017, economic growth will be higher than in the eurozone and will also once again surpass that in Germany. For 2019, the outlook for the Austrian economy is still favora-ble, but as the economic cycle moves towards its end and global support eases off – particularly from the US, where a number of factors are expected to result in a flatten-ing of economic growth in the year following the tax cut – this is likely to result in the economy normalizing on a very solid level of growth of around 2%.

-2

-1

0

1

2

3

01/15 01/16 01/17 01/18

Industry

International industry

Consumer

ConstrucitonServices

Sentiment indicators (standardized)

1.11.5

3.02.8

2.0

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2015 2016 2017 2018 2019

qoq, s.a. (right-hand scale) annual average

GDP (real change in %, qoq and yoy)

Focus Austria

UniCredit Research Page 9

US trade policy could exacerbate economic slowdown

Protectionist tendencies and the consequences for Austria

In early March, US President Donald Trump announced the introduction of increases in import duties on steel and aluminium (25% and 10% respectively). For the Member States of the European Union, the introduction was postponed until 1 May 2018, but is now in effect. According to US statistics, the US imports affected goods at a value of around EUR 400 million in 2017 from Austria (steel: EUR 240 million, aluminium: USD 160 million). This affects under 0.3% of total exports in Austria, with a percentage of GDP of just 0.1%. The direct economic consequences of US levies on steel and alumin-ium for Austria are therefore manageable.

In the event of a widening of trade policy measures to other products as a response to the EU’s retaliatory tariffs on some US goods, the potential consequences for the Aus-trian economy would be significantly higher, however, as a total of about 2.5% the Aus-trian value added depends on demand from the USA. According to our calculations, a decline of 10% in Austrian exports to the USA (calculated based on value added) would lower Austrian GDP by around 0.2 percentage points.

Focus Austria

UniCredit Research Page 10

Labor market benefits from the good economy

■ In 2017, the unemployment rate fell to 5.5% – a drop in unemployment in Austria for the first time since 2011

■ Acceleration of the growth in employment in the first half of 2018

■ Improvement on the labor market continues, but pace begins to slacken

■ Unemployment rate to fall to 4.8% in 2018 and 4.7% in 2019

■ Focus: Dynamics of the labor supply continue to shape the Austrian labor market

In June 2018, unemployment reached its lowest level since sum-mer 2013 at 7.8% (national method) or 4.7% (Eurostat)

Labor market benefits from the good economic situation

The economic upturn has now contributed to a striking improvement in the situation on the Austrian labor market. After stabilization in 2016, the significant increase in growth in employment in 2017 to almost 2% above the previous year enabled a drop in the unemployment rate for the first time since 2011. After an average of 9.1% in 2015 and 2016, the unemployment rate dropped to 8.5% in 2017 according to the na-tional method. The unemployment rate (according to the Eurostat calculation) fell to 5.5% in 2017 (2016: 6.0%).

In the first half of 2018, the positive development on the labor market became even faster. Employment rose by an average of 2.6% year-on-year. This corresponds to an in-crease of almost 95,000 employees. Of these new jobs, around 60,000 were on the ser-vice sector. In relation to the size, a disproportionately high number of new jobs were created primarily in construction (9,000) and industry (24,000). In addition, the number of job vacancies increased by almost 15,000 to a total of about 62,000. In the same pe-riod, the number of jobseekers fell by 37,000. In June, the seasonally adjusted unem-ployment rate was 7.8% or 4.7% (Eurostat).

STARKER ANSTIEG DER BESCHÄFTIGUNG UND DER OFFENEN STELLEN, ARBEITSLOSIKGEIT GEHT ZURÜCK

Source: Statistik Austria, Eurostat, UniCredit Research

Improvement trend on the labor market continues

Given the good economic situation, the improvement in the situation on the Austrian labor market will continue. However, due to declining economic support in the months ahead, somewhat lower growth in employment is to be expected. Given the continuing sharp increase in the number of workers, therefore, the fall in unemployment will slow down.

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10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

3,300

3,350

3,400

3,450

3,500

3,550

3,600

3,650

3,700

2015 2016 2017 2018

Employment and job vacancies

Vacancies (absolute, s.a., right-hand scale)

Employment (in 1,000, s.a.)

-40

-20

0

20

40

60

80

100

-4

-2

0

2

4

6

8

10

2015201620172018

The unemployedUnemployed (change yoy, in 1,000, right-hand scale)

Unemployment rate (nat. meth. s.a., left-hand scale)

Unemployment rate (Eurostat, s.a., left-hand scale)

Focus Austria

UniCredit Research Page 11

Further decline in the unemploy-ment rate in 2018/19 – but at a slower pace

For the full year 2018, we are expecting employment growth of just over 2%, with a drop in the annual average unemployment rate to 7.7% (national method) or 4.8% (Euro-stat). In 2019, the positive trend on the labor market is expected to slow down in view of the more moderate pace of growth in the economy. In comparison to 2018, there will only be a very slight drop in unemployment rates by around one tenth of a percent-age point.

STRONG INCREASE IN EMPLOYMENT IN CONSTRUCTION AND IN INDUSTRY SUPPORTS THE DROP IN UNEMPLOYMENT

Source: Statistik Austria, Eurostat, UniCredit Research

Increase in employment by around 50,000 annually needed for the ris-ing supply of labor on the labor market

Supply of labor: the dominant factor on the domestic labor market

With the start of the full free movement of workers in Austria for employees from Cen-tral and Eastern European countries acceding to the EU in May 2011 (Hungary, Poland, Czech Republic, Slovakia, Slovenia and Baltic States) as well as from 2014 (Romania and Bulgaria), there has been strong labor migration to Austria, which has increased the supply of labor significantly up to the middle of 2018. The supply of labor in this period rose by 6% or 220,000 people. About 80% of this increase is attributable to for-eign employees.

The increase in the labor supply from an annual average of around 50,000 up to 60,000 persons means that in Austria, employment has to rise at least as much to re-duce unemployment. This was not the case until 2017 – the first time since the labor market opened up to employees from the new EU Member States. Due to an increase of around 70,000 workers, the number of jobseekers fell year-on-year by almost 17,000. In addition to economic development in Austria, therefore, the extent of the increase in the labor supply is decisive for the development of the unemployment rate and must therefore be taken into consideration for further assessing the situation on the labor market.

0.30.1 -0.2

5.00.2 0.42.1

-0.8 -2.4 -3.41.5

17.42.5

-2.5 -2.5 -1.5

2.9

3.830.1

6.2

-9.8

34.647.4

42.6

-20

-10

0

10

20

30

40

50

60

70

2015 2016 2017 2015 2016 2017

Employment trend by sector(in 1,000)

Services Construction

Industry Primary sector

EmployeesdUnemployed

6655 51

58

42

9.1 9.18.5 7.7 7.6

-4

-2

0

2

4

6

8

10

-40

-20

0

20

40

60

80

100

2015 2016 2017 2018 2019

Workforce(in 1.000)

Unemployed (change against previous year)Employed (change against previous year)Unemployment rate (in % - right-hand scale)

(in %)

Focus Austria

UniCredit Research Page 12

Inflation in Austria remains at around 2%

■ Rate of inflation climbed to 2.1% in 2017 – primarily caused by the rise in the oil price

■ Slightly lower inflation in the first half of 2018 supported by the strength of the euro

■ Higher oil price, strong domestic demand and more significant wage growth result in expected inflation of 2.2% for 2018 and 2% for 2019.

■ Normalization of monetary policy brings an end to the zero interest rate policy after the summer of 2019

■ Focus: How the exchange rate affects oil price dynamics

Oil price-related increase in infla-tion in 2017 to 2.1%

Slight fall in inflation in the first half of 2018 due to a strong euro, but the trend has reversed

Oil price caused increase in inflation in 2017

After 0.9% in 2016, the average rate of inflation in Austria in 2017 rose to 2.1%. The upturn was primarily down to the increase in the crude oil price from an average of USD 45.1 in 2016 by more than 20%, reaching USD 54.9 per barrel in 2017. This made the Transport product division, which includes the fuel prices and which had dampened inflation in the previous years, one of the biggest price drivers. 19.4% of overall infla-tion, i.e. around 0.4 percentage points, is down to this, while it represents only 12.9% of the basket of goods (see diagram below). In addition, the stronger demand also pushed prices up. This is reflected on the one hand in the product group Restaurants and Hotels, where prices for hosting services rose by almost 3%, and apartments for rent, which rose by more than 4% year-on-year, although the category Housing and En-ergy posted a below-average rise in inflation. The only relative and simultaneously ab-solute price damper category in 2017 was Communications.

With an average of 1.9% in the first half of 2018 compared to the previous year, in-flation in Austria was slightly lower than in the previous year. The comparatively lower price increase in crude oil and the weakening of the US dollar against the euro contributed to this. However, that trend has now reversed. In June, inflation rose to 2% year-on-year. Due to the uncertainty surrounding the termination by the US of the nu-clear deal with Iran, the oil price is around 20% above the level at the beginning of the year and even 50% higher than one year ago. In addition the dampening effect of ex-change rate trends, which has been significant to date, has abated, as the euro has lost around 5% against the US dollar since the spring.

INFLATION IN 2017 DRIVEN BY TRANSPORT, HOSTING SERVICES AND A PRICE INCREASE FOR LEISURE AND CULTURE

Source: Statistik Austria, Eurostat, UniCredit Research

12.9

11.0

11.5

11.1

3.9

18.5

15.2

13.1

12.7

6.2

Transport

Restaurants &Hotels

Food

Recreation&Culture

Tobacco&Alc.beverages

Price drivers in 2017Impact on inflation in %

Weight in %

2.1

1.2

7.0

5.1

5.5

8.7

20.0

-1.3

1.1

2.0

3.6

3.7

6.2

15.2

Communications

Education

Furnishing

Clothing

Health

Misc. goods

Housing&Energy

Factors with a (relative) price dampening effect 2017

Impact on inflation in % Weight in %

Focus Austria

UniCredit Research Page 13

Inflation in 2018/19 at around 2% year-on-year

Asset purchase program ends at the turn of the year, movement in interest rates at the earliest after summer 2019

Stable inflation and normalization of monetary policy in sight

Due to the low price basis in the summer of 2017, the price of oil will provide for a moderate increase in inflation from the middle of 2018 beyond the 2% mark year-on-year, despite the ongoing dampening effect of the euro, which is stronger compared to the previous year. The annual average inflation for 2018 of 2.2% is expected to be slightly higher than in the previous year. In 2019, due to ongoing price pressure, espe-cially for services, we expect inflation in the area of around 2%, especially as the im-provement in the situation on the labor market is expected to ensure a moderate accel-eration in wage growth. With an average of 2.3%, the HICP in Austria in 2018 will be above inflation in the eurozone for the tenth year in succession.

The higher oil price as well as the economic recovery, which influences wage dynamics, will ensure an upward trend in inflation in the Eurozone as a whole in the coming months. The increase in inflation to an average of 1.7% in 2018 will enable the ECB to introduce the normalization of monetary policy. The ECB will allow the asset purchase program to expire as expected at the end of 2018 and has announced that it will only consider chang-ing interest rates after the end of the summer of 2019.

IL PRICE FLUCTUATIONS PRIMARILY AFFECTING INFLATION THROUGH TRANSPORTATION

Source: Statistik Austria, Eurostat, UniCredit Research

Increase in the price of oil in 2018 is only partially offset by the stronger euro

How the price of the euro affects oil price dynamics

The development of the oil price has a noticeable effect on inflation in Austria. The ef-fect on the development of domestic prices depends not only on the international price fluctuations from crude oil traded in US dollars, but also on the movements of the USD against the euro. Depending on the direction and magnitude of these movements, the effect of the oil price may therefore be exacerbated or attenuated and even completely cancelled out by changes in exchange rates.

In our current forecast, we anticipate an increase in the oil price of an average of USD 54.9 per barrel in 2017 to USD 73.6 in 2018. This corresponds to an increase of around 34%. At the same time, we expect a price increase in the euro compared with the US dollar from 1.13 to 1.20 on annual average in 2018, i.e. an increase by around 6%. As a result, the oil price measured in euro, will only increase from EUR 48.6 to EUR 61.5, not quite 27%. The increase in the oil price is absorbed slightly on the global markets by the rise in the rate of the euro, which means that the effect on inflation is therefore muted.

To clarify the influence of oil-price or exchange-rate movements on Austrian inflation, we have calculated alternative scenarios using our short-term inflation model. In the

1.0

1.1

1.2

1.3

1.4

1.5

1.6

30

45

60

75

90

105

120

2010 2011 2012 2013 2014 2015 2016 2017 2018

Oilprice and FX

Oil price/barrel in euroOil price per barrel in USDUSD/1EUR (right-hand scale)

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

01/15 01/16 01/17 01/18 01/19

Transportation HousingFood othersCPI total

Inflation(with effects resulting from goods contained in the basket)

Focus Austria

UniCredit Research Page 14

oil-price scenario, at the end of 2018 we assume an unchanged exchange rate for al-ternative dollar oil prices of plus or minus 10% compared with our current forecast. This results in inflation that is 0.03 percentage points higher, or 0.02% lower inflation than in the base forecast. Given unaltered US dollar oil prices, an increase in the ex-change rate of the euro by 10% would even result in a somewhat greater fall in infla-tion by 0.04 percentage points, while a drop in the exchange rate by 10% against the US dollar would result in inflation that is 0.05 percentage points higher. Due to the very short time horizon examined (up to the end of 2018), only minor deviations emerge from the base forecast.

Since the fluctuation in the exchange rate tends to be somewhat more strongly re-flected than the oil price fluctuations in US dollars, a 10% increase in the oil price in USD could be more than compensated for according to the model by a 10% strength-ening of the euro. A synchronous fall in the euro would in fact more than double the ef-fect on inflation.

Focus Austria

UniCredit Research Page 15

Good economic situation eases budget plans

■ Strong economic growth helped the overachievement of budgetary targets in 2017

■ Budget proposal for 2018 provides for deficit reduction to 0.4% of GDP

■ Balanced budget planned for 2019

■ Public debt falls rapidly as a result of more disciplined budgetary policy and asset reduction at Bad banks

■ Focus: The new government sets its sights on the tax and contributions ratio

Budget deficit fell to 0.7% of GDP in 2017

No negative budget balance in 2019 for the first time since the 1970s

Lower budget deficit

After the increase in the general government budget deficit to 1.6% of GDP in 2016, due mainly to the revenue shortfall as a result of the tariff reform of payroll and in-come tax, the budget deficit was reduced significantly in 2017. At 0.7% of GDP, the deficit was clearly below the original budget target of 1.2% of GDP, supported by the good economic cycle with economic growth of 3% instead of the original draft budget’s forecast of 1.5%.

Revenues were significantly above target. The positive trends in taxes and duties paid, particularly corporation tax and higher contributions to unemployment insurance due to strong employment growth contributed to this. In contrast, income from value-added tax and payroll and income tax was below the official expectations. The ex-penses in 2017 were above the target specifications due to payments to KA Finanz AG and the repurchase of afflicted bonds from HETA. In contrast, the expenses for pension insurance and unemployment insurance were below target.

GOOD ECONOMIC SITUATION ENSURES STRONG REVENUE GROWTH OF OVER 4% IN THE FIRST HALF OF 2018

Source: Statistik Austria, Eurostat, UniCredit Research

No negative budget balance in 2019 for the first time since the 1970s

No new debt planned for 2019, total public debt declining significantly

After the late election date, the budget for 2018 was decided simultaneously with the estimate for 2019 at the end of April 2018. The current draft provides for a budget def-icit of 0.4% of GDP for 2018 and a balanced budget for 2019. The draft of the budget contains no significant structural changes. In the areas of education, research and se-curity, financial priorities are being set, while moderate cuts are planned for expenses incurred in connection with labor market and integration policy. For 2020,- an income tax reform was announced for 2020, which is intended to reduce the tax and contribu-tion ratio to 40% of GDP. In view of the positive economic trend and the low interest rates, the planned budgetary targets should be within range. In the first half of the year, the payments in increased by more than 4% compared with the previous year and are therefore better than expected.

80

90

100

110

120

130

140

150

160

170

180

01/15 01/16 01/17 01/18

Taxes (total) Income tax

Corporate tax Value added tax

Tax receipts (Average monthly revenue, 2010=100)

0

10

20

30

40

50

FR DK BE

SWFI AT IT EL

Euro D

EEU LX H

U NL

HR PT SI UK CZ EE PL ES CP MT SK LV LT BG

RM IE

Tax and contributions ratio in comparison(2016, in % of GDP)

Focus Austria

UniCredit Research Page 16

This is due to growth in income and payroll tax and corporation tax. In addition, the expenses fell by more than 2% year-on-year, resulting in a net borrowing requirement of EUR 2.8 billion, which is almost EUR 2.5 billion less than in the previous year.

Total public debt fell to 78.4% of GDP in 2017 and is therefore below the 80% mark for the first time since 2008. Due to the low new debt in 2018 and the balanced budget for 2019, supported by the further asset reduction at the Bad Bank HETA, a fur-ther decline in public debt is expected in relation to the economic output in the fore-cast period. We expect a reduction to 72% by the end of 2019.

DISCIPLINED BUDGET POLICY SUPPORTS DECLINE IN PUBLIC DEBT IN RELATION TO GDP

Source: Statistik Austria, Eurostat, UniCredit Research

Austrian tax and contributions ratio has fallen since 2015

Further reduction requires intelli-gent tax and social security contri-bution adjustments, otherwise there is a risk of government cut-backs

The new government sets its sights on the tax and contributions ratio

The government program has explicitly set the target of reducing the tax and contri-butions ratio (taxes and social security contributions in relation to economic output) to 40% of GDP. After over 43% in 2015, the ratio fell to 42.7% as a result of the tax reform in 2016 and continued to fall to 41.9% in 2017. Nevertheless, in an interna-tional comparison Austria has a far above-average tax and contributions ratio, which is stated in the government program as an argument for a further reduction.

However, in our view, the amount of the tax and contributions ratio itself is not enough to be the sole argument for a reduction. This is the case on the one hand as wealthy countries also tend to have high tax and contributions ratios. Ultimately, only econom-ically successful countries can undertake comprehensive government activities, for ex-ample in terms of legal, security or social policy, for its citizens. On the other hand, a reduction in the tax and contributions ratio does not automatically mean a more effi-cient state that can generate higher economic growth. Instead, a change of the structure of the tax and duties burden is key here.

With the reduction in unemployment insurance contributions for low-earners as of 1 July 2018 and especially the income tax reform planned for 2020 by lowering taxes on labor, the government is not only planning to reduce the tax and contributions ra-tio further, but also to have a positive influence generally on economic growth. How-ever, government services for citizens will only not be reduced, if it is actually possible to compensate for the revenue shortfall by structural changes and measures that in-crease efficiency at the same amount.

1.0

1.6

0.70.5

0.0

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2015 2016 2017 2018 2019

Budget deficit (in % of GDP)

Social security funds Communities (incl. Vienna)Federal states Central statetotal

84.6 83.678.3

74.7 71.9

0

10

20

30

40

50

60

70

80

90

100

2015 2016 2017 2018 2019

Public debt (in % of GDP)

Social security funds Communities (incl. Vienna)

Federal states Central state

total

Focus Austria

UniCredit Research Page 17

Banking market gaining momentum

■ Demand for credit benefits from a good economic situation with 2.2 percent increase on average in 2017 and further in-creasing momentum in the first half of 2018

■ Acceleration in corporate credit growth and strong increase in housing loans

■ Despite a low interest environment: strong deposit growth in 2017 and in the first half of 2018 of around 4% on average for the year, primarily driven by an increase in momentum among corporate customers

■ Focus: A nation of savers, despite negative real interest rates

2.2% increase in demand for credit in 2017 with increasing momentum over the course of the year

High liquidity of companies leads to strong deposit growth.

Despite a low interest environment, even private households are build-ing up their bank deposits

Credit demand continued to gain momentum in the first half of 2018

Upward trend in loans and deposits

Alongside the economic recovery, credit demand in Austria increased significantly in 2017. The entire credit volume rose by 2.2% on average for the year and reached over EUR 341 billion or 92.3% of GDP by the end of 2017. A significant contribution was made by the positive development in corporate loans, which rose 2.9% on aver-age, with growth as high as 4.9% at the end of the year. The amount of loans for con-sumer spending and SMEs also began to rise in 2018 even though they stagnated in terms of the annual average. The demand for housing loans remained strong, but the growth of under five percent was relatively moderate compared to previous years. De-spite the increasing momentum in corporate loans, a large part of the investment boom is not financed by bank loans, but rather by internal financing and other forms.

The high liquidity of Austrian companies is reflected in the strong deposit growth of more than 8% for company deposits. Private households also continued to expand their bank deposits in 2017 and they remained the most important investment class by far, even if the volume of new business decreased somewhat compared to 2016. The second most important investment class continued to be funds in 2017, while bonds and life insurance again went into a new net decline. Furthermore, another in-significant factor in the assessment of private households in Austria is direct share eq-uities.

In the course of the first half of the year, credit demand in Austria increased slightly again, with corporate loans making the greatest contribution to the rising momen-tum. The construction and real estate sectors are de facto solely responsible for the growth in corporate credit. The demand for credit by other sectors in the Austrian economy showed only little growth due to the very good liquidity situation and the in-creasing significance of alternative financing in light of the excess liquidity of the cor-porate sector. Following the structure of the Austrian economy, some of the financing came from abroad in the form of intra-Group financing, but also from trade credits. Housing loans continued to develop dynamically, but the growth rates barely in-creased any further over the course of the first half of the year. After years of declining volumes, the financing of consumer spending and SMEs is slightly increasing for the first time in 2018.

Despite the generally low interest rates, total deposits in Austria are increasing sharply and the pace of growth did not fall in corporate investments or private house-holds in the first half of 2018. Short-term deposits are dominant given the low inter-est rate environment. The demand for funds remained high in the first half of 2018, while the attractiveness of life insurance continues to decline.

Focus Austria

UniCredit Research Page 18

ECONOMIC UPSWING SENDS CREDIT AND DEPOSIT GROWTH IN AUSTRIA SOARING

Source: OeNB, UniCredit Research

Good economic prospects and favourable financing conditions justify further in-creases in the demand for credit

Fixed interest rates gain in significance at historically low level

Majority of new investments with a short-term nature

Sustained favorable economic outlook in the second half of 2018 and 2019 en-sure continuing good demand for credit

Despite the solid liquidity situation and financing alternatives on the capital mar-ket, corporate loans will increase slightly. We assume that the demand for financ-ing for SMEs will accelerate in the months ahead. In addition, optimistic consumer sentiment is expected to increase the demand for consumer financing slightly once again. Credit growth in housing finance, which is made possible by the continuing low interest rates, the strong demand for housing and at least slightly rising real estate prices, should remain buoyant. The trend towards fixed interest rates hedg-ing the historically low interest rates, which was on average around 1.8 percent for new housing loans in the middle of 2018, is likely to continue. The proportion of fixed interest rate loans in the new loans as a whole is now around 60% in Austria. In 2015 that figure was only 15%.

On the investment side, the low interest environment in private households will continue to dominate. Investments will probably continue to focus on very short-term deposits, which are expected to be the subject of the majority of new invest-ments, since deposits with longer fixed terms as well as bonds do not offer attrac-tive yields. We expect additional demand for investments in funds.

AUSTRIAN HOUSEHOLDS PREFER SAVING DEPOSITS DESPITE REAL LOSSES

Source: OENB, UniCredit Research

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

01/15 01/16 01/17 01/18

Corporates ConsumptionHousing

-2

0

2

4

6

8

10

12

01/15 01/16 01/17 01/18

Deposits (yoy change in %)

Corporates Households total

-4

-3

-2

-1

0

1

2

3

4

5

6

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Real interest rate in Austria (in %, nominal interest rate in new business or return from gov. bonds minus CPI in 12 months excl. tax)

savings deposits (overnight)

savings deposits with agreed maturity up to 2years

average gov. bond yield (10 years)

total, -0.3%

4%

47%

26% 24%

7% 5%

-60%

-40%

-20%

0%

20%

40%

60%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Return for deposits since 2007 (annually, real, households)

Change against previous year in %

Share of financial assets in %

Corporate lending banks(yoy growth adjusted for loan sales and notional cash pooling,)

Focus Austria

UniCredit Research Page 19

A nation of savers, despite negative real interest rates

Austrian households prefer a very conservative investment of their financial assets. Of the more than EUR 500 billion1) (approx. 137.1% of GDP), 47% are held as savings de-posits, more than half of which are in fact overnight money assets. In 2017, just over EUR 120 billion – around 24% of financial assets – was invested in securities. More than half of this was invested in funds. The proportion of bonds was 27%, while equities ac-counted for just over 20%.

Nor has the attractiveness of savings deposits for Austrian households subsided in 2018 either. In the first few months of the year, investments in deposits rose by an average of just under 4% year-on-year. In view of the years of low interest rates, investments in de-posits have particularly low returns. While the annual return of savings deposits was still nominally over 2 percent between 2007 and 2011, this figure fell from 2012 to an aver-age of 0.7 percent. Taking inflation into account, as well as the capital gains tax of 25%, however, in both cases this means a negative real return of 0.7 or even 1.2%. For the en-tire period from 2007 to 2017, this resulted in negative real returns of 1.0% (see page 18, graph on the right).

In comparison, an investment in securities in this period produced real income growth of 1.2% per annum. The investment in equities was particularly profitable with a real in-crease of 3.3% on average, given a particularly favourable performance from 2012 on-wards.

1) Financial assets without other proportional values and other receivables.

Focus Austria

UniCredit Research Page 20

Austria at a glance

Source: Statistik Austria, OeNB, IMD, TI, WEF, EU Commission, UniCredit Research

Structural indicators 2017

Area (in km²) 83,879

Population (in mn) 8.8

President Dr. Alexander van der Bellen

Chancellor Sebastian Kurz

Rating (Moody´s/S&P/Fitch) Aa1/AA+/AA+

Economic performance

Gross domestic product (in EUR bn) 370

GDP per capita (in EUR) 42,025

GDP per employee (in EUR) 85,840

GDP per capita (in % of EU27 average, PPS) 144.3

Gross domestic product (real change against previous year in %) 3.0 1.3 (Ø 2013-2017)

Workforce (in 1,000) 3,995

Employed (in 1,000) 3,655 3,553 (Ø 2013-2017)

Employment rate (in %) 41.6

Number of unemployed (in 1,000) 340 332 (Ø 2013-2017)

Vacancy rate (in %) 1.4

Monthly average income (gross, in EUR) 3,521

International competitiveness Ranking Trend

IMD-World Competitiveness Index 18

IMD Economic Performance 17

IMD Government Efficiency 32

IMD Business Efficiency 14

IMD Infrastructure 14

WEF Global Competitiveness Index 18

WEF Inclusive Development Index 10

Transparancy International Corruption Perceptions Index 16

European Innovation Scoreboard 9

Research&Development Ratio (R&D-expenses in % of GDP) 3.2

Investment ratio (Investments in % of GDP) 23.5

Tax and levies ratio (Tax and levies in % of GDP) 42.5

Merchandise exports (in EUR bn) 123.2 2.8% (Ø 2013-2017)

Export ratio (in % of GDP) 38.4 38.2 (Ø 2013-2017)

Merchandise imports (in EUR bn) 117.6 2.3% (Ø 2013-2017)

Import ratio (in % of GDP) 39.9 39.3 (Ø 2013-2017)

Foreign direct investment (outward, in EUR bn, 2017) 12.0 6.4 (Ø 2013-2017)

Foreign dircet investment (outward, in % of GDP, 2017) 3.3

Foreign direct investment (inward, in EUR bn, 2017) 9.2 3.1 (Ø 2013-2017)

Foreign direct investment (inward, in % of GDP, 2017) 2.5

Federal states 2017

Area

(in km²)

GDP

(real, yoy

in %)

(Ø 2013-

2017)

GDP/capita

(in EUR)

GDP

(in % of

Austria)

Unemploy-

ment rate in %

Burgenland 3,962 3.3 1.6 29,286 2.3 8.6

Carinthia 9,538 3.0 0.8 35,908 5.4 10.2

Lower Austria 19,186 2.9 1.0 34,426 15.5 8.7

Upper Austria 11,980 3.6 1.3 42,913 17.1 5.8

Salzburg 7,156 2.6 1.3 50,440 7.5 7.3

Styria 16,401 3.7 0.6 37,647 12.6 5.3

Tyrol 12,640 3.5 1.8 45,604 9.2 5.8

Vorarlberg 2,601 3.0 2.4 46,263 4.9 5.8

Vienna 415 2.6 1.3 49,983 25.4 13.0

Germany30.1%

US6.8%

Italy6.4%

France5.0%

Switzerland4.9%

other EU27.5%

others19.2%

Export markets 2017

Germany36.8%

Italy6.1%

China5.8%

Switzerland5.2%

Czech Rep.4.3%

other EU23.3%

others18.6%

Import markets 2017

Primary sector1.3%

Industry21.9%

Construction6.2%

Services70.6%

GDP by sectors 2017

UniCredit Research Page 21

Disclaimer and Imprint

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Disclaimer of liability: This publication is neither a marketing communication nor a financial analysis. It contains information on general economic data. De-spite careful research and the use of reliable sources, we cannot assume any responsibility for the completeness, correctness, up-to-dateness and accuracy of information contained in this publication.

The opinions of the authors do not necessarily reflect those of Bank Austria and those of the companies which have engaged the ser-vices of the authors. The information contained in this publication is not to be interpreted as an offer or invitation for the sale or pur-chase of securities of any kind. We reserve the right to modify the views expressed in this publication at any time without prior notifi-cation. This information should not be interpreted as a recommendation to buy or sell financial instruments, or as a solicitation of an offer to buy or sell financial instruments. This publication serves information purposes only and does not replace specific advice taking into account the investor’s individual personal circumstances (e.g. risk tolerance, knowledge and experience, investment objectives and financial circumstances). Past performance is not a guide to future performance.

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Imprint

Disclosure according to Sections 24 and 25 of the Austrian Media Act (Mediengesetz - MedienG):

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