Regional Economic Dynamics between Recovery and Energy Crisis

Strong catch-up effects in tourism-intensive regions

The Austrian economy in 2022 continued to be influenced by the recovery from the COVID-19 pandemic as well as the energy crisis resulting from the Ukraine war. However, rapid price increases slowed down the recovery in the second half of the year across various sectors. In particular, tourism experienced a strong revival. According to a quick estimate by WIFO of gross value added, the provinces of Salzburg (+7.4 percent) and Tyrol (+7.2 percent) grew the most significantly (Austria +4.9 percent).

Despite high inflation, regional labour markets experienced a strong upswing, with significant employment growth and a decrease in the number of unemployed individuals in all federal provinces. The regional labour markets in the tourism-intensive provinces of Salzburg and Tyrol showed particularly positive developments, with the highest employment growth rates recorded at +4.3 percent and +5.1 percent, respectively. At the same time, unemployment decreased most significantly in these provinces.

Energy crisis slows down manufacturing sector

The Austrian industry experienced strong dynamics in 2022, but this growth was significantly dampened by high price increases. Nominal production in the manufacturing sector increased by +16 percent. However, the significant rise in producer prices resulting from energy costs limited the real growth to only around +5 percent.

Regionally, there were diverse trends in the manufacturing sector. The electronics industry in Carinthia and beverage manufacturing in Salzburg showed particularly strong growth. The electronics industry in Carinthia expanded its nominal production value by one-third, contributing nearly 12 percentage points to the overall 21 percent increase in Carinthia's manufacturing sector. Beverage manufacturing in Salzburg experienced a nominal sales increase of 38.6 percent and contributed 13 percentage points to the growth in Salzburg.

(Housing) construction boom comes to a halt

The substantial price increases had a particularly negative impact on the Austrian construction sector, leading to a decline in real construction investments. The massive increase in construction prices was the main cause of the negative real growth in construction investments in 2022. The regional construction price index for residential and settlement construction rose by double digits in all federal provinces. A similar trend was observed in order intake, which, despite the high price surge, only increased by +2 percent compared to the previous year. In Tyrol (‑8.2 percent), Vienna (‑9.3 percent), and Carinthia (‑7.7 percent), new orders even shrank in nominal terms.