Boston, MA -- (SBWIRE) -- 07/31/2013 -- Despite poor Q113 real GDP readings, which showed a decline in year-on-year (y-o-y) growth of 0.6%, we believe that the Austrian economy will be one of the outperformers in the eurozone during the course of 2013 and into 2014. This is a result of a reasonably strong services export base, as well as an uptick in private consumption. We forecast real GDP growth of 0.8% in 2013, followed by 1.5% in 2014, compared to the eurozone average of -0.3% and 1.0% in 2013 and 2014 respectively.

The ruling grand coalition between the centre-left Social Democrats (SPO) and conservative Austrian People's Party (OVP) is set to retain power in the general election scheduled for September 29. However, we believe it is too close to call which party will gain the larger share of the vote, and therefore occupy the chancellorship, with the SPO on average two percentage points ahead of the OVP in the five most recent national opinion polls.

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Major Forecast Changes

We have revised up our forecast for Austria's current account surplus, from 0.9% and 0.5% of GDP, to 2.1% and 2.3% in 2013 and 2014 respectively. This is a result of domestic import demand remaining subdued, while exports of high-tech machinery and autos continue to tick up.

Key Risks To Outlook

In the event that the far-right Freedom Party of Austria (FPO) performs better than expected in the general election we could see a coalition forming between the FPO, OVP and the liberal conservative Team Stronach party. This would likely be decried by the EU, which placed sanctions on the Austrian government following the 1999 coalition between the OVP and the FPO, led by Jorg Haider at the time.

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