Successfully investing in Austria

last updated on 7 June 2024 | reading time approx. 3 minutes

How do you assess the current economic situation in Austria? »
How would you describe the investment climate in Austria? Which sectors offer the largest potential? »
What challenges do German companies face during their business ventures into Austria? »
Why should companies choose to enter/remain in the Austrian market? »
In your opinion, how will Austria develop? »

How do you assess the current economic situation in Austria?

Austria, which like Germany has an industry specialising in the production of machinery, is affected by the current economic downturn in the EU. For this reason, the economic downturn that began in mid-2022 is still ongoing. High interest rates in particular are weighing on investment demand and demand for construction services. Demand for residential construction has collapsed due to high interest rates.

However, it is expected to bottom out in 2024. This will result in economic growth that will be weaker than the eurozone average in 2024. The service sector will perform slightly better than the manufacturing sector. Due to declining inflation in the eurozone, interest rate cuts are expected from mid-2024. These will have a positive impact on the Austrian economy and will result in an economic growth of between 1.5 percent and 1.8 percent for 2025. The construction industry is not expected to pick up again until 2025, with the government's announced housing package providing support alongside the expected interest rate cut. This 2.2 billion euro package of measures is intended to create more affordable housing, increase the home ownership rate and boost the order situation in the construction sector.

Downside risks include a delayed or weaker than expected economic recovery in the EU as well as geopolitical and trade conflicts. Inflation has slowed due to the fall in wholesale prices for electricity and gas, the weak economy and restrictive monetary policy and will decrease to 3.8 percent. However, Austria's inflation will still be 1 percentage point above the eurozone average in 2024. The labour market is reacting to the economic slowdown with a delay. However, the unemployment rate will fall again in 2024 after a temporary increase.

How would you describe the investment climate in Austria? Which sectors offer the largest potential?

Despite all the adversities, the general investment climate can still be described as robust. In any case, the federal government is trying to do its part. Starting in 2023, an investment allowance has been introduced and corporate income tax has been reduced to 23 percent. In addition to these measures, the accelerated depreciation of buildings introduced in recent years, declining balance depreciation and the investment-related tax allowance for natural persons, which has been in place for some time, should also be mentioned. There is great potential in those sectors that will benefit from investments that will be necessary to achieve the climate targets.

What challenges do German companies face during their business ventures into Austria?

German entrepreneurs are generally not confronted with any extraordinary challenges when they become involved in Austria. Of course, there are differences, but these are of secondary importance and usually play only a minor role. Due to the common language as well as the geographical proximity, many procedures are similar – also in tax law. Tax, company and commercial law are largely the same as in Germany, so that no major surprises are to be expected.

Secure and stable economic conditions in Austria makes the market entry for German companies manageable and plannable. Negative surprises, however, are always to be found in the area of trade law and plant licensing. On the whole, however, German entrepreneurs should be able to find their way around in Austria relatively quickly and should not encounter any significant problems. However, it is advisable to seek tax and legal advice when entering the market in order to avoid unnecessary stumbling blocks.

Why should companies choose to enter/remain in the Austrian market?

Austria offers attractive conditions for foreign companies. As one of the richest countries in the EU, Austrian consumers have above-average purchasing power. The infrastructure is highly developed and the administration is modern and efficient.

In addition, the quality of life in Austria is very high. Vienna is regularly ranked among the most liveable cities in the world. The high level of personal safety certainly contributes to this. Austria is also relatively safe with regard to climate change and natural disasters triggered by it. The security of supply with electrical energy has the highest priority in Austria, which is why Austria has a top position in this respect in comparison with other European countries. Furthermore, Austria is politically very stable and has a reliable legal system. Relations between employers and employees are traditionally very good, which results in a very low number of strike days. Austria has a large highly qualified workforce, which is reflected in high labour productivity. This is partly due to the dual education system practiced in Austria, which combines theory and practice and leads to an optimal link between business and education.

Another advantage of Austria is its central location in Europe. Vienna is the leading hub for air traffic and logistics to Central and Eastern Europe. Therefore, Austria offers excellent access to the Central and Eastern European markets. Last but not least, Austria is also fiscally competitive due to attractive group taxation and a dense network of double taxation agreements.

In your opinion, how will Austria develop?

Economic growth in 2025 will range from 1,5 percent to 1,8 percent and the inflation rate in 2025 will be between 2,6 percent and 2,7 percent. As a small, open economy, the economic development of Austria depends on the international economic development. Austria's continued competitiveness will also depend on whether the high inflation can be brought under control as quickly as possible. The demographically driven shortage of labour also poses a challenge.

In the long term, it will therefore be crucial to train enough skilled workers to meet the demand or to attract them to the country. Austria must develop a strategy to become even more attractive for qualified immigrants. It is expected that productivity-enhancing topics such as education, digitization and research will be given greater priority in the coming years. In addition, the realization of the energy transition will present Austria with major challenges, but will also create opportunities.