Effects of the pandemic on Austria’s foreign trade, the financial behavior of households and companies as well as the lending and deposit business of banks
Vienna (OTS) – Austria’s internationally strongly networked economy was hit extensively and hard by the global COVID-19 pandemic. The breakdown of international supply chains, the failure of the demand for goods and massive travel restrictions influenced Austria’s foreign trade in the form of a greatly reduced trade in goods and services as well as high revenue losses in tourism. Austria’s savings rate rose in the wake of the pandemic and is now at the level of the euro area. In view of the great uncertainty and the persistently low level of interest rates, private households were looking for financial flexibility and mostly invested in overnight deposits. They also acted cautiously on questions of debt and reduced consumer credit, while real estate financing was still in demand. Companies were confronted with an extremely tight liquidity situation, which was initially alleviated by means of loan deferrals and new credit lines from Austrian banks as well as government aid measures.
“The economic effects of the COVID-19 pandemic can be felt clearly in Austria and across all sectors,” explained Vice-Governor Gottfried Haber at a press conference at the Oesterreichische Nationalbank. Austria’s trade in goods and services collapsed massively in the course of the COVID-19 pandemic. In the second quarter of 2020 – the most difficult economic phase to date – the export of goods recorded a decline of 19 percent (compared to Q2 / 19). There was even a decrease of 31 percent in service traffic. Imports were also significantly weaker: imports of goods were 21 percent and services 29 percent below the same quarter of the previous year. Some industries were affected by the consequences of the pandemic much more severely than others: while the export of machinery and vehicles, which is particularly important for Austria, as well as those of processed goods, recorded severe losses, the demand for chemical and pharmaceutical products even increased.
Regardless of the declining gross flows, the current account closed almost evenly in the second quarter of 2020. In 2019, trade development was subdued in view of geopolitical risks and the impending BREXIT, but at EUR 11.3 billion (or 2.8 percent of GDP) the highest current account surplus since the financial crisis of 2008 was achieved. Tourism was particularly hard hit by the global pandemic. In the second quarter, revenues slumped to EUR 0.6 billion (–82 percent). As a result of the relatively favorable start to the year, the loss in the first half of the year was less significant at around a third. German tourists spent almost 80 percent less in Austria in the second quarter of 2020 than in the same period of the previous year, while other markets of origin such as the UK, the USA and China almost completely collapsed.
“The Republic of Austria reacted to the COVID-19 pandemic by rapidly building up large liquidity buffers,” explained Johannes Turner, Director of the Statistics Department. In the first half of the year, EUR 19 billion of government emissions were bought by foreigners and EUR 14 billion by residents. Favorable financing conditions made it easier to borrow quickly and limit the additional burden of interest payments.
The containment measures caused by COVID-19 and the associated uncertainties, as well as a tense labor market, led to private households having to refrain from consumption and increased security savings. In the second quarter of 2020, both net disposable income and consumption – accumulated over four quarters – plummeted historically (–1.0 percent and –3.5 percent, respectively). In line with the international trend, the savings rate – accumulated over four quarters – rose to 10.4 percent in June 2020 and was roughly the same as the average in the euro area (10.3 percent). However, the development was flatter than in many other countries. Private households were able to expand their financial assets in the context of the pandemic. The investment in the first half of 2020 was even particularly high at just under EUR 13.5 billion and exceeded the volume that had been invested in many previous years.
The trend that has persisted since the 2008 financial crisis of preferring to build up overnight deposits at the expense of tied-up funds continued. In the first nine months of 2020, EUR 11.2 billion (+11.4 percent) flowed into this type of investment, while tied deposits were reduced by EUR 5.0 billion (–5.7 percent) due to the relatively low interest rate advantage. Noteworthy was the particularly high level of interest in shares that were bought in the first half of 2020 in view of the favorable entry prices after the global stock market crash of EUR 1.6 billion.
Households acted cautiously on debt issues: In the first nine months of 2020, 18 percent fewer new consumer loans were taken out than in the same period of the previous year. Many Austrians were not deterred from buying real estate, even by the COVID-19 pandemic, and took out new housing loans amounting to EUR 17.2 billion (+16 percent).
With the outbreak of the COVID-19 pandemic, credit growth for non-financial companies also increased significantly, reaching 7.2 percent in April. In the following months, the pace of growth decreased again, but remained at a high level of 5.8 percent in September.
Companies were supported by Austrian banks, which made an important contribution to coping with the economic consequences of the COVID-19 pandemic, primarily through extensive loan deferrals. In June 2020, the loan volume deferred to companies and private households totaled over EUR 30 billion and decreased to EUR 17.3 billion in September 2020. The majority of this accounted for voluntary loan deferrals at EUR 10.7 billion. At the same time, Austrian banks made new loans and credit lines available. In particular, business loans of up to EUR 1 million were re-granted to an unusually high extent in May and June.
Inquiries & contact:
National Bank of Austria
Statistics hotline
(+43-1) 404 20-5555
statistics.hotline@oenb.at
National Bank of Austria
Dr. Christian Gutlederer
Press officer
(+43-1) 404 20-6900
christian.gutlederer@oenb.at
www.oenb.at
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