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© 2011 International Monetary Fund
September 2011
IMF Country Report No. 11/275
Austria: 2011 Article IV Consultation—Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Austria
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2011 Article IV consultation with Austria, the following documents have been released and are included in this package:
The staff report for the 2011 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on June 14, 2011 with the officials of Austria on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on August 5, 2011. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff statement of September 2, 2011.
A Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its September 2, 2011 discussion of the staff report that concluded the Article IV consultation.
A statement by the Executive Director for Austria.
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
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Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
INTERNATIONAL MONETARY FUND
AUSTRIA
Staff Report for the 2011 Article IV Consultation
Prepared by the Staff Representatives for the 2011 Consultation with Austria
Approved by Juha Kähkönen and Tamim Bayoumi
August 5, 2011
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Key Issues:
Macroeconomic prospects: GDP growth is expected to reach 3.3 percent this year, supported by external demand, re-stocking, and equipment investment, and moderate thereafter, as the cyclical recovery comes to an end. Inflation has risen to above the euro area average. The main risk factor is turmoil in the euro area periphery, especially should it extend to core euro area countries or Central, Eastern, and South-Eastern Europe (CESEE).
Bringing the public debt to safer grounds: The recovery and the current multiyear consolidation plan are reducing the deficit, but not enough to put the debt firmly on a downward trajectory in the medium-term, which is needed to address fiscal risks. With a strong economy, low unemployment, and supportive monetary policy, there is macroeconomic space to tighten fiscal policy further starting with the 2012 budget. Measures to strengthen incentives for older workers to retire later, improve efficiency in the provision of healthcare, and rationalize subsidies would cut spending while making the government more efficient. A comprehensive fiscal federalism reform to better align spending and financing responsibilities would further underpin consolidation efforts.
Strengthening private capital buffers, supervision, and regulation in the banking sector: Austrian banks are absorbing large credit costs on CESEE exposures. As profitability returns, priority should be given to building up high quality capital, as required by forthcoming international standards, and exiting government support. Progress in enhancing bank supervision and macro-prudential regulation should continue, also in coordination with ongoing international efforts.
Enhancing long-term growth prospects by increasing employment rates and human capital: While overall unemployment is low, employment rates of low-skilled workers could be improved by reducing tax wedges. Productivity growth could be boosted by education reform, particularly to increase the number of university graduates in disciplines that complement R&D.
The staff’s team, comprising Ms. Detragiache (head), Messrs. Steinlein and Vandenbussche (all EUR) and Ms. Mishra (RES), visited Vienna during June 2-14, 2011. Mr. Prader (Alternate Executive Director) joined the discussions. The mission met with Finance Minister Fekter, Austrian National Bank (OeNB) Governor Nowotny, other senior officials, members of Parliament, and representatives of the social partners, the financial sector, and economic research institutes.
Contents
I. Context
II. Background-Eastward Expansion, Crisis, and Recovery
III. Outlook and Risks
IV. Policy Discussions
A. Fiscal Policy: Speeding up Debt Reduction by Increasing Expenditure Efficiency
B. The Financial Sector: Managing Credit Risk and Building a More Stable System
C. Structural Issues: Enhancing Labor Utilization and Human Capital
V. Staff Appraisal
Tables
1. Selected Data, 2007-12
2. Medium-Term Macroeconomic Framework, 2007-16
3. Balance of Payments, 2007-16
4. General Government Operations, 2007-16
5. Financial Soundness Indicators for the Banking Sector, 2006-10
Figures
1. Expansion to the East
2. Macroeconomic Developments
3. External Sector
4. Fiscal Developments and Outlook
5. Banking Sector, 2010
6. Selected Financial Market Indicators
7. Labor Market Performance
Box
1. The Authorities’ Consolidation Plan
Annexes
1. Potential Output in Austria: Structural Shifts
2. Recent Developments in the Banking Sector
3. Spillover Risks from the Euro Area Periphery to Austria
4. Options for Government Expenditure Rationalization in Austria
5. Austria: Reforming Fiscal Federalism
6. Immigration in Austria
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INTERNATIONAL MONETARY FUND
AUSTRIA
Staff Report for the 2011 Article IV Consultation—Informational Annex
Prepared by the Staff Representatives for the 2011 Consultation with Austria
(In Consultation with Other Departments)
August 5, 2011
Contents
I. Fund Relations
II. Statistical Issues
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September 2, 2011
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Public Information Notice (PIN) No. 11/117
FOR IMMEDIATE RELEASE
September 6, 2011
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
Telephone 202-623-7100
Fax 202-623-6722
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September 2, 2011