Title page
Contents
Foreword 4
Executive Summary 10
1. Key policy insights 16
The pandemic hit Austria hard, requiring to adjust the sharing of health responsibilities across levels of government 16
Macroeconomic outlook and risks 22
Economic and social supports are being adapted to the recovery 30
Important structural changes are pending after the pandemic 42
Social cohesion is under pressure 49
Public sector reforms become more compelling 61
Illustrative medium-to-long term growth scenarios and policy recommendations 66
References 70
2. Helping the business sector to cope with new opportunities and challenges 75
COVID-19 induced structural change, adaptation to climate change and population ageing pose challenges to the Austrian growth model 76
Adapting business framework conditions to promote productivity growth, an efficient allocation of resources and investments 84
Stimulating the adoption of key digital technologies 92
Reinvigorating investments for a resilient recovery 101
Making the most out the available pool of talent 111
Fostering knowledge creation and R&D to boost innovation 124
References 128
Table 1. A strong recovery 11
Table 1.1. Macroeconomic indicators and projections 27
Table 1.2. Events that could lead to major changes in the outlook 30
Table 1.3. Fiscal policy, public finances, debt sustainability: past OECD recommendations and government follow-ups 30
Table 1.4. Labour market, social partnership, collective agreements: past OECD recommendations and government follow-ups 54
Table 1.5. Gender equality: past OECD recommendations and government follow-ups 59
Table 1.6. Immigrants' economic participation and social inclusion: past OECD recommendations and government follow-ups 61
Table 1.7. Public sector reforms (including education reforms): past OECD recommendations and government follow-ups 62
Table 1.8. GDP impacts of reforms 67
Table 1.9. Estimated fiscal costs of selected policy recommendations 67
Table 2.1. Results for empirical investment models for different firms' size 109
Table 2.2. Effective average and marginal corporate tax rates for different investment projects and financing options 110
Figure 1. The drop in activity has been severe 11
Figure 2. Fiscal support has been vigorous 11
Figure 3. Labour force participation of women could improve further 13
Figure 4. Productivity in business services lags behind 13
Figure 5. Austria is less digitalised than peer countries 14
Figure 1.1. The four waves of the pandemic differed in intensity 17
Figure 1.2. Containment policies were more frequently adjusted than in comparable countries 18
Figure 1.3. The massive national vaccination effort had to cope with scepticism in certain parts of the population 19
Figure 1.4. The intensity of the pandemic varied across Lander 20
Figure 1.5. Workplace and retail mobility has fluctuated during the pandemic 22
Figure 1.6. The drop in activity has been severe but the resilience of investment is encouraging 23
Figure 1.7. The consumption mix has dropped more and changed less than in peer countries 24
Figure 1.8. Exports remain closely linked to European value chains 25
Figure 1.9. House prices have soared after a long period of moderation 28
Figure 1.10. After the pandemic banks' capital should be strengthened 29
Figure 1.11. Austria's economic support during the pandemic 31
Figure 1.12. Budget costs of Corona aid measures 32
Figure 1.13. Grants and Loans in the Recovery and Resilience Facility 37
Figure 1.14. The massive fiscal stimulus will be followed by a strong consolidation 40
Figure 1.15. Public finance dynamics are less favourable than in peer countries 41
Figure 1.16. Structural reforms can help to lower public debt 42
Figure 1.17. There is potential for progress in reducing carbon emissions 44
Figure 1.18. Industrial processes and transportation account for a large share in emissions 46
Figure 1.19. The room is large for harmonising and raising carbon prices 47
Figure 1.20. Aggregate labour market performance and social transfers were upholding social cohesion before the pandemic 50
Figure 1.21. Social protection has prevented employment losses during the pandemic 51
Figure 1.22. The increase in long-term unemployment 52
Figure 1.23. The self-employed have received less support than wage earners 55
Figure 1.24. Self-employment may become more frequent in the future 55
Figure 1.25. Women's labour force participation can improve significantly 57
Figure 1.26. The childcare infrastructure should be considerably strengthened 58
Figure 1.27. Foreign-language speakers have a large share in the population and face integration challenges 60
Figure 1.28. Public spending is already high 61
Figure 1.29. Improving public trust 66
Figure 2.1. Labour productivity is high 77
Figure 2.2. Productivity-enhancing reallocation is low 78
Figure 2.3. Job tenure of employees is high 79
Figure 2.4. There is room for progress in digitalisation 80
Figure 2.5. The share of ICT investment is elevated but below the top-performers 80
Figure 2.6. The pandemic has boosted teleworking 81
Figure 2.7. Productivity growth set to be the main driver of GDP growth 83
Figure 2.8. Productivity growth has slowed down 85
Figure 2.9. More productive industries grew less than other industries 86
Figure 2.10. Austrian competition rules are restrictive in several market segments 88
Figure 2.11. Business regulations are in line with OECD averages but professional service restrictions remain high 90
Figure 2.12. Business dynamism is lagging behind 93
Figure 2.13. Austrians display high entrepreneurial self-confidence but limited willingness to start a business 94
Figure 2.14. Early and later stage venture capital is underdevelopped 95
Figure 2.15. Digitalisation of businesses lags behind innovation leaders 96
Figure 2.16. Access to high-speed broadband needs to be improved 98
Figure 2.17. Estimated productivity gains from higher adoption to key ICT technologies 99
Figure 2.18. Adults' skills and ICT training in firms lag behind top performers 100
Figure 2.19. Digital security risk management of smaller firms needs to be improved 101
Figure 2.20. Aggregate labour market performance and social transfers were upholding social cohesion before the pandemic 102
Figure 2.21. Investments have risen fastest in manufacturing sectors and intellectual property assets 103
Figure 2.22. Support measures have upheld profitability and contained a faster rise of corporate debt 104
Figure 2.23. Bank loans are the most important form of external credit for small- and medium-sized firms 106
Figure 2.24. Corporate leverage in Austria is elevated and the stock market is less developed 108
Figure 2.25. Set of jobs available continues to change 112
Figure 2.26. Labour supply mismatches have been increasing 113
Figure 2.27. Gender differences in retirement incomes and salaries are high 114
Figure 2.28. Labour tax wedges are high 115
Figure 2.29. Employment gaps are sizeable for disadvantaged groups 117
Figure 2.30. Austria dedicates considerable public resources to life-long learning, but participation by the high-skilled remains average and participation... 119
Figure 2.31. Inter-regional migration and regional economic conditions: Austria in a comparative perspective, 2015-2018 122
Figure 2.32. Policy reform proposals to foster the responsiveness of inter-regional migration to local economic conditions in Austria 123
Figure 2.33. R&D intensity is high and R&D tax incentives generous 125
Figure 2.34. R&D activity specialised in medium to low R&D intensive industries 126
Boxes
Box 1.1. The Health Literacy Strategy 21
Box 1.2. Short term macroeconomic outlook 26
Box 1.3. Policy support measures in response to the pandemic 32
Box 1.4. Special measures in support of culture and sports during the pandemic 35
Box 1.5. Austrian Resilience and Recovery Plan 37
Box 1.6. The Eco-Social Tax Reform 43
Box 1.7. Norway's policies to promote electrical vehicles 48
Box 1.8. The Lower Austria universal job guarantee programme 53
Box 1.9. Norwegian, Swedish and German experiences in facilitating mothers' return to work 57
Box 2.1. Restructuring in the Austrian car cluster 82
Box 2.2. The role of private foundations 87
Box 2.3. Banking sector resilience and expected insolvencies 107
Box 2.4. Investment of smaller firms is more sensitive to higher leverage 108
Box 2.5. Individual training accounts in France 120
Box 2.6. Re-evaluating housing policies 120
Box 2.7. Inter-regional migration and labour market dynamism in Austria 121