Global Economic Outlook – September 2022 Gas and energy prices lead the current economic and Supply chain disruptions, causing limitations to production political discussion, with reduced but still significant and cost increases, are still persistent in many sectors. Austrian exposure to Russian gas exports (86%, compared More than 40% of Austrian companies considered supply to 49% for Germany, in 2021). The main risk, correlating shortages as main economic risk in summer 2022. strongly with gas prices, is electricity prices, which have risen dramatically (by over 400% compared to 2020 levels). Further risk stems from skill shortages across a range of This poses price risks for corporates and households, economic sectors, tightened by Covid, but mainly driven by contributing significantly to inflation. Government measures structural issues that have already been in place before the to compensate for increasing energy prices are on the pandemic and the Ukraine war. More than 30% of Austrian way, and will limit the fall in purchasing power, but at the service sector firms report non-availability of labor force as cost of worsening the fiscal deficit, which has already been their main risk. increased by strong Covid compensation (with government debt at 82.8% of GDP in 2021). Driven by the supply side shock, Austrian inflation rate is expected to average 8.3% in 2022, while strong wage increases in autumn negotiations can be expected, reducing Chart 32: Austrian Electricity Price Index real income losses. Combined with strong fiscal response to both Covid and energy prices, prospects for households 600 might turn out better than for other European peers, supporting consumption and therefore stabilizing GDP 500 growth rates. 400 This comes at a cost of further deteriorating fiscal balance. 300 Looking beyond the current crisis, consolidating measures Index and strategies for tackling structural issues are key for 200 supporting future growth. 100 Based on these assumptions, we forecast the Austrian economy to grow by 3.9% in 2022, followed by a 0.3% 0 growth in 2023, therefore not expecting an outright fall 2006 2008 2010 2012 2014 2016 2018 2020 2022 in 2023. Nevertheless, quarters with negative growth, Source: Austrian Energy Agency. especially in winter 2022/23, are not unlikely. Inflation will remain significantly above the ECB target, projected at 5.8% in 2023. Chart 33: Factors limiting production (industry), Austria Major downside risk to the forecast is a full stop in gas 40% delivery in autumn/winter, ending in a strong recession in 35% 2023 and higher inflation rates than in the main scenario. 30% Over the medium term, annual growth is projected to 25% recover to around 1.8%. t on main economic risks20% 15% Dr. Stefan Fink 10% Chief Economist, KPMG in Austria 5% Austrian companies repor 0 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Shortage of material and/or equipment Labor Source: European Commission, KPMG analysis. © 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 34