In 2008, Austrian exporters achieved another record current account surplus (EUR 9.8 billion), as is evident from the balance of payments for the year, which the Oesterreichische Nationalbank presented in a press conference today. The surplus in the current account reflects above all a surplus in the services account, which made the Austrian economy independent from capital imports and enabled Austria to reduce its net external debt.
“The world economy has been hit by the hardest recession since the end of World War II, and the global macroeconomic framework will emerge fundamentally changed from the crisis,” said OeNB Governor Ewald Nowotny on the occasion of the Bank’s press conference on the balance of payments for 2008. He named three imbalances that were in the process of being unwound: The insufficient saving propensity of U.S. citizens, as a result of which U.S. households had amassed excessive amounts of debt; the misperception of credit risks, as a result of which risks had been underestimated – which now needed to be re-assessed fundamentally; and the excessively high prices of oil, as a result of which current account imbalances had risen – which the recession was causing to shrink as it enhanced the terms of trade for oil-importing countries, at least temporarily.
At the same time, Governor Nowotny reiterated that “it would be wrong to stop pursuing the traditional strengths of the Austrian economy now that the global crisis had fed through to the Austrian economy.” After all, Austria could bank on the innovative power of SMEs, on the well-oiled networks of the social partners, and on the high and internationally recognized qualifications of Austrian skilled labor. Moreover, Austria had achieved its strong competitive position through well-conceived, long-term strategies. Therefore, Austrian banks and other investors stood committed to their involvement in Central, Eastern and Southeastern European countries (CESEE), also in times of crisis. The region had lost none of its development potential, and it would revert to above-average growth rates once the crisis was over.
To refocus perceptions that may have become distorted, Governor Nowotny recalled that, first, notwithstanding Austria’s strong Eastern focus, the euro area continued to be the most important market for Austria: In 2008, other euro area countries accounted for roughly half of Austrian exports, and for close to 60% of Austrian imports. Second, almost half of Austria’s financial assets were invested in the euro area, i.e. in a range of stable countries, without any risk of currency fluctuations. Third, Austria had been among the first and most successful investors in the European growth markets, but had certainly not been the only investor in those markets: Roughly one-tenth of all exports from euro area countries were currently destined for the countries in the region that joined the EU in 2004 or 2007. Germany alone would export more than five times as much as Austria to the CESEE area.
Last but not least, Governor Nowotny warned against the risk of reverting to protectionist strategies, which might backfire particularly badly for a small, open economy such as Austria.
Subsequently Executive Director Andreas Ittner, the OeNB Governing Board member to whom the statistical function reports, presented the key results of the balance of payments for 2008.
“The difficult external conditions notwithstanding, Austrian exporters achieved a record current account surplus of EUR 9.8 billion or 3.5% of GDP in 2008,” Executive Director Ittner explained, which means that “the domestic economy is not dependent on cross-border financing; much rather, it is an exporter of capital.”
Goods exports and imports almost offset each other in 2008, but the balance was slightly on the negative side, leaving services to be the only driver of the current account surplus. The balance of payments account recorded record surpluses in the travel account, as well as for services other than travel. Austria’s travel receipts increased by EUR 1 billion, which pushed up net travel income to a record high of EUR 7.1 billion. Net income from other services likewise continued to increase, reaching EUR 6.3 billion in 2004. In this respect Executive Director Ittner stressed that “Austria has traditionally held special treats for tourists, but over time it has also asserted itself as a provider of services, notably business services.”
Despite its international success, the Austrian economy had not remained unscathed from the global economic crisis. The volume of goods exports had dropped sharply in late 2008/early 2009; business services, such as transport services or R&D services had fallen to zero growth in the fourth quarter of 2008; the travel account alone was still recording positive growth rates, at least up to January 2009. Looking ahead, Executive Director Ittner anticipated extraordinary challenges for the external economy, yet he was confident that the current account would remain in surplus nonetheless also in 2009.
The financial crisis had, of course, also spilled over to the financial account: The increase in financial assets was the lowest since 2003 (+EUR 48 billion). With investors pulling out of all kinds of foreign securities, in increasingly high numbers in the fourth quarter, the volume of foreign securities sold outnumbered annual purchases for the first time ever. Domestic mutual funds played a key role in this respect. Even smaller than the increase in assets was the increase in financial liabilities (+EUR 36½ billion; a level underperformed in just 2 out of the 10 years since Austria joined the euro area).
In concluding, Aurel Schubert, Director of the OeNB’s Statistics Department, singled out a number of interesting details from the external statistics: He started by stressing the positive effects which the close trade relations of Austria with Central, Eastern and Southeastern European countries had produced in the past and would most likely continue to produce in the future. While Germany remained Austria’s most important trading partner, by far, the CESEE area accounted for most of the increase in exports (EUR 2.65 billion) achieved in 2008. The tourist industry told a similar story: While German citizens continued to account for more than half of all overnight stays by nonresidents, visitors from CESEE countries were those that produced the highest growth rates, mostly double-digit growth rates. For services other than travel, the picture was much the same: With a share of 30% in exports and imports, Germany continued to be Austria’s major trading partner. However, services exports to the 15 “old” EU Member States had stagnated in 2008, while exports to the 12 “new” members had jumped by 12%. Exports to Russia, finally, stood out with an increase by as much as 50%, pushing Russia into the top ten of Austrian export destinations, according to Director Schubert.
Turning to the financial account, and first to outward FDI, Director Schubert stressed that, at EUR 19.9 billion, outward FDI flows, were just 20% lower in 2008 than the record result of 2007. Investment activity had been strong up to the fourth quarter, implying that investors believed that the projects in which they invested had a future – those in Eastern and Southeastern Europe as much as elsewhere. In turn, Austria continued to prove its worth as an attractive location for inward FDI. While the figure for 2008 was substantially below the result for 2007, inflows of EUR 9.3 were, indeed, the second-best result of all times.
With regard to net sales of foreign securities, above all by domestic mutual funds, Director Schubert explained that the valuation losses had, in fact, been a multiple of the sales volumes. “While totaling EUR 274 billion at the beginning of the year, the portfolio worth of foreign securities shrank to EUR 230 until year-end; however, sales only explain EUR 10 of the difference, whereas valuation losses explain as much as EUR 34 billion.” Moreover, investors had shifted funds within their portfolios, investing more heavily in (mostly euro-denominated) securities issued by the “new” EU members or non-euro area countries such as Sweden, Denmark and the United Kingdom. Purchases of Austrian securities by nonresidents were rather low at EUR 16 billion: Investors largely pulled out of stocks and mutual fund shares, whereas short-term Austrian Treasury bills (+EUR 7 billion) were especially high in demand.
The financial account surplus resulting from the current account surplus was invested abroad above all by the banking sector (+30 Mrd EUR), through long-term loans granted to foreign nonbanks and higher deposits with foreign banks. The government, too, had increased its short-term external assets by EUR 7 billion by the fourth quarter. What the data also show is that banks substantially reduced foreign interbank loans and deposits after the crisis emerged. The net increase in lending to foreign nonbanks was very pronounced, though, on balance, totaling EUR 21 billion (roughly half of which was connected lending to financial holdings or leasing companies). Foreign loan financing for Austrian companies, finally, also continued to rise in the first half of the year (by EUR 5 billion), but was drying up as the year progressed.
Information (in German) provided at the press conference has also been uploaded onto the OeNB’s website at statistik.oenb.at
For further statistical information (in German), readers may refer to: dieaktuellezahl.oenb.at