The state of the Austrian economy has been a frequent topic in the headlines recently, with the country’s Economic Chamber (WKÖ) among those voicing concerns. Speaking in Vienna last week, WKÖ President Harald Mahrer described the economy as being “under enormous pressure,” citing bureaucracy, high labour costs for employers, and a shortage of workers as key factors behind the downturn, as reported by The International.
Meanwhile, Statistik Austria characterised the situation as a long-term decline in prosperity, noting that GDP per capita in the third quarter of 2024 was weaker than during the same period in 2019, despite slight improvements in inflation and sporadic periods of recovery. Speaking earlier this week, Tobias Thomas, head of Statistik Austria, highlighted the particular struggles of the industrial sector, which saw a 3.7% decline compared to the previous year, driven by global economic headwinds. Other sectors, including business services (-2.5%), construction (-1.7%) and trade (-1.5%), have similarly suffered significant setbacks, according to the agency.
Forecasts Revised
In light of this weak performance, Austria’s leading economic think tanks have revised their forecasts. The Austrian Institute of Economic Research (Wifo), which had initially anticipated a 0.6% contraction for 2024, is expected to release updated figures soon. Meanwhile, the Organisation for Economic Co-operation and Development (OECD) remains cautiously optimistic, forecasting GDP growth of 1.1% in 2025 and 1.4% in 2026.
Coalition Negotiations and Business Relocation
The economy, along with updates to the tax system, remains a key point of debate in the ongoing coalition negotiations between the People’s Party (ÖVP), Social Democrats (SPÖ) and NEOS. However, there is still uncertainty surrounding the policies the new government will prioritise.
A recent survey has highlighted another troubling trend: half of Austria’s businesses are now weighing up the possibility of moving at least part of their operations abroad. This comes as Austria continues to slide down the global competitiveness rankings.
Barriers to Business Success
Speaking to The International, Vienna-based business consultant Miglena Hofer pointed to bureaucracy and high operational costs as major obstacles to starting and sustaining a business in Austria, particularly for small and medium-sized enterprises (SMEs). The bureaucratic hurdles include finding out whether you need a business licence and, if so, what kind. That’s often an uphill task, Hofer said.
“For example, certain trades require a regulated business licence. While the reasoning behind this – consumer protection, stability, minimum quality standards – is solid, the execution is highly questionable,” she explained. “[For some trades] you will need to complete a three-year specialised school and pass the relevant final apprenticeship exam. But for the production of parachutes, you need no such things.”
Hofer also criticised the inconsistent advice provided by various offices, which is compounded by the outdated and unreliable online submission systems. “It’s common to get contradictory advice from the various offices you have to deal with. All of that is accompanied by filing various forms – often by post, as the online submission system isn’t always reliable,” she said.
Room for Improvement
Despite these obstacles, Hofer believes that SMEs still hold significant potential for Austria’s economy, as they represent the majority of businesses globally and play a vital role in job creation and economic growth. “Clearly, SMEs matter,” she said.
To improve the business climate, Hofer advocated for an overhaul of Austria’s outdated SME legislation, much of which is decades old. She also recommended simplifying the registration process, providing consistent and reliable support and reducing employment costs for SME employers.
