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- The Austrian economy has entered 2007 with significant momentum and optimism. BA-CA’s business indicator and consumer sentiment reflect the highest levels for many years. Industrial surveys are signalling an economic boom and growth forecasts for 2007 have been revised upwards to 2.8 %. Exports (+ 5.7 %) and investments (+ 4.3 %) continue to experience robust growth. Favourable labour market data, the improvement in the market climate over the past months and a fall in the inflation rate may lead to a lower savings ratio and a marginal increase in private consumption (+ 2.2 %). Loans are expected to rise by 5 % in 2007, with a balance emerging between the shorter and longer term components and loans for residential construction. Financial assets are expected to grow a little more slowly in 2007 than in 2006 (5.7 %); mutual funds, insurance policies and bonds will continue to be among the preferred investment types. Structured products, both loans and deposits, will continue to make inroads at the expense of classic bank products.
- We expect continued growth in CEE countries (including Turkey and Russia); for 2007, parallel to the euro area, we forecast slightly slower yet still substantial growth of 5.5 %. In the EU member countries investments in construction and new industrial plant will continue to be the main growth driver. Slovakia and the Czech Republic will use the increased production capacities in the automotive industry created in 2006 to step up exports. The introduction of the euro and the reduction of income taxes in Slovenia at the beginning of 2007 have given an impetus to the country’s economy. In terms of economic growth, the three Baltic countries are still among the European leaders, although there are increasing signs of overheating, with risks for Estonia and Latvia in particular. Bulgaria and Romania, members of the EU since 1 January 2007, are now able to fully exploit the advantages of membership in the Union. Consumption will remain lively, while investments – mainly in connection with foreign direct investment and infrastructure projects supported by the EU – are the main drivers of growth on both sides of foreign trade. The short-term economic outlook is negative only for Hungary: the restrictive turnaround in budgetary policy will lead to reduced spending in 2007 both for private households and the public sector.
Growth prospects in Turkey are again positive following the slowdown resulting from the turbulence in financial markets in May/June 2006. The substantial growth in investment over the last three years has helped to increase production capacity. Turkey will, however, continue to be susceptible to changes in sentiment on financial markets. Presidential and parliamentary elections are pending in 2007, which may give rise to some temporary uncertainty.
At 6 %, growth in Russia is expected to remain strong in 2007, although exports of gas and oil will encounter capacity bottlenecks. Weaker industrial growth due to less dynamic exports and strong import competition should be offset by faster income growth and a strong expansion in the services sector.
In CEE as a whole, macroeconomic risks lie less in an economic slowdown than in an overheating of the economy and in possible corrective action. Economic growth and the structural expansion of financial intermediation still lead us to expect a strongly growing banking sector in our markets.