ETF Trends
ETF Trends

Austria’s economy and related exchange traded funds (ETFs) could be burdened by its neighbors’ unsteady economies.

In the fourth quarter of 2008, Austria’s GDP dropped 0.2% as a result of a 0.8% quarterly decrease in exports to Germany and emerging Europe, reports Boris Groendahl for Forbes. Forecasts have Austria’s economy contracting 0.5% for 2009, whereas it saw a 1.8% growth last year.

Austria has lent heavily into central eastern Europe (CEE) countries with foreign lending amounting to $278 billion, or 65% of its GDP, writes The Prudent Investor for Seeking Alpha. This has caused financial markets to re-price risk for Austrian government debt over the past couple weeks. The CEE region accounts for around 50% of total Austrian foreign bank assets.

CEE economies are currently grappling with bleak economic conditions and this may result in higher loan defaults for Austrian banks.

The public debt ratio has climbed to 62.6% of GDP in 2008 from 61.9% in 2007, and is likely to hit just below 70% of GDP by 2010. Forecasts for Austria’s fiscal defict are at 4% to 5% for the next couple of years because of rising expenditures and declining tax revenues.

An Austria aid package has be rejected by the EU, which included expanding fiscal stimulus policies and aid for Eastern European countries. The machinery industry and automotive suppliers in Austria are seeing the effects of an ailing German economy, their main buyers.

  • iShares MSCI Austria Investable Mkt Idx (EWO): down 4.9% year-to-date; up 26.5% in the last month

ETF EWO performance

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.