Abstract
The Austrian economy performed well, but long-term problems were unaddressed. Austria has weathered the slump well. The government's economic policy priorities and recent achievements have been commendable. Tax reform will help improve the economy's long-term growth potential. Successful reform of inter-governmental fiscal relations is key to achieving the medium-term fiscal objectives. The recent pension reform will ensure long-term sustainability of the pension system. The creation of the financial market authority has strengthened financial supervision but continued vigilance is required. The government's structural reform agenda is appropriate.
November 24, 2003
This staff statement provides an update on some policy developments that have taken place since the issuance of the report on the consultation. These developments are consistent with the authorities’ policies as described in the report and do not alter the staff appraisal.
In early November, the government announced a third “stimulus package” including supply-side measures (such as a more flexible apprenticeship system, more liberal working time rules, and measures to encourage corporate research and development), as well as some tax relief for investment and increased infrastructure spending over the medium-term. As the quantititave impact of these measures will be small and is already incorporated in the staff’s baseline, the package does not affect the fiscal outlook for 2003-04.
Also in November, the government announced its plans to sell its 25 percent holding of the steel company Boehler-Uddelholm AG. This is in line with the government’s intention, reported in the staff paper, to sell its holdings in the six remaining companies in which it maintains a significant share.
Finally, the Financial Market Authority has recently issued two guidance notes to banks regarding foreign currency lending and loans involving repayment vehicles, aimed at strengthening banks’ internal risk management in regard to these activities. They are also continuing their public campaign to raise borrowers’ awareness of the risks involved.