Causes of declining investment activity in Austria

Austria’s share of investment relative to GDP, which is high by international standards, dipped significantly in recent years. This downtrend, which was also evident in peer economies, chiefly reflected an adjustment process in a climate of weaker long-term growth. While the international trend reversed in mid-2013, Austria’s investment share continued to decline. The main reasons for Austrian companies’ current reluctance to invest can be traced back to fragile demand and deep uncertainty. Lack of access to finance is unlikely to have dampened investment activity, as the higher level of internal financing has offset the diminishing importance of bank loans. Although there is some evidence of banks tightening their lending conditions, this is unlikely to have led to credit rationing, as demand for bank loans has also fallen off. Estimations based on a structural vector autoregressive (VAR) model also show that loan supply shocks have only had a small negative impact on growth.