17.12.2024

Regional Economic Development: Austrian Federal Provinces Struggle with Ongoing Economic Weakness

The Economy in the Federal Provinces in Summer 2024

The ongoing economic weakness continues to characterise the economic environment in Austria. Real gross domestic product is expected to fall in 2024, with strong regional differences. While Vienna stands out due to positive developments in tourism and the labour market, Upper Austria is suffering particularly badly from the recession due to its industrial focus. Salzburg and Tyrol are only recording moderate declines, while Lower Austria and Carinthia are more severely affected.

Industrial and construction sectors in crisis, with heterogeneous developments in the federal provinces

Nominal industrial production fell by 4.6 percent across Austria in the second quarter of 2024. In Upper Austria, one of the centres of manufacturing, production sold slumped by 9.4 percent. Carinthia was hit similarly hard (–7.7 percent), where the electronics industry dominated the regional decline. In contrast, Salzburg recorded an increase of 4.8 percent, which was primarily driven by beverage production. The construction sector is still on a downward trend: in the second quarter of 2024, production sold fell by 2.3 percent across Austria. The outlook remains subdued in view of the ongoing lack of investment.

Tourism industry in the federal provinces

The regional development of demand in tourism also shows a very heterogeneous picture in the summer season: only four federal provinces recorded year-on-year growth in summer overnight stays (May to September 2024: Vienna +7.8 percent, Burgenland +2.7 percent, Styria +0.9 percent, Upper Austria +0.8 percent). A new record was thus reached in Vienna. In the federal provinces of Salzburg and Lower Austria, demand remained 1.8 percent below the previous year's level, in Carinthia by 1.2 percent, in Vorarlberg by 0.8 percent and in Tyrol by 0.3 percent.

Regional labour market situation characterised by sectoral differences

The recession continues to weigh on the Austrian labour market. In the third quarter of 2024, employment across Austria only grew by +0.2 percent compared to the previous year. There are clear regional differences: while Vienna, Salzburg and Tyrol recorded employment growth, employment in Upper Austria, Carinthia and Styria shrank noticeably. The different sectoral orientation of the federal provinces reinforces these disparities: industrialised federal provinces are suffering from the weakness of manufacturing and construction, while the public service sector is increasing employment. However, the increase in the number of unemployed in the third quarter was slightly lower than in the previous quarter at 10.3 percent.