Austria continues to lose competitiveness
EcoAustria's ECI Competition Index shows a downward trend in the fourth quarter of 2024
The competitiveness of the Austrian economy is becoming increasingly negative. As the current EcoAustria Competitiveness Index (ECI) for the fourth quarter of 2024 shows, the previously stagnant phase has now solidified into a phase with a clear downward trend since the end of 2022. What is particularly critical here is that Austria is performing worse in a pan-European comparison - not only relative to economically less developed countries such as Greece or the Baltic states, but also in absolute terms. The loss of competitiveness is therefore not only a consequence of the existing global challenges, but also an expression of Austria's own economic weaknesses.
Specifically, the ECI measures the development of competitiveness in a comparison of the 27 EU member states and is based on three key indicators: Gross fixed capital formation, net exports and real labor productivity. In all three areas, the data from the current ECI shows a clearly negative picture for Austria.
Gross fixed capital formation has stagnated over the entire period under review since 2017 and has even been declining since the start of 2022. The decline reflects widespread uncertainty and pessimistic profitability expectations among companies and investors. This reluctance to invest has a direct impact on long-term economic performance.
The development of net exports is also causing increasing concern. Although they briefly exceeded the pre-crisis level at the beginning of 2024, a clear trend reversal has been evident since the middle of the year. While the declining foreign trade volumes also point to the global economic slowdown, the negative development of net exports also indicates structural weaknesses in the Austrian export industry. Competitive products and services are losing visibility and market penetration on international markets.
Another key problem area is real labor productivity. After Austria performed comparatively well during the COVID pandemic, productivity is now only just above the level of early 2017. Productivity growth has come to a standstill. The above-average increase in unit labor costs compared to other countries is having a particularly problematic effect here, which is weighing on the cost efficiency of Austrian companies.
Nikolaus Graf, Head of Competitiveness Research at EcoAustria, summarizes the current situation as follows: "The analysis shows that the Austrian economy is increasingly losing substance. In order to counteract this development, economic policy measures are needed that are specifically aimed at promoting investment, increasing productivity and international competitiveness. In an environment of geopolitical uncertainties and global challenges, Austria cannot afford economic complacency."
The results of the ECI underline the fact that Austria cannot rest on its historical strengths. Structural reforms and clear economic policy stimuli are necessary to halt the downward trend and secure the country's competitiveness in the long term.
