MACROECONOMICS

Austria vs. Switzerland

Executive Summary

This paper explores the concept of country's economy in a holistic context. The main focus of the research is on Austria and Switzerland and its relation with macroeconomics. The research also analyzes many aspects of economy and tries to gauge its effect on both countries. Finally the research describes various factors which are responsible for the results of both economies and tries to describe the overall comparison of Austria's economy with Switzerland economy.

Table of Contents

Executive Summary1

Introduction3

1) Growth Rate4

1.1GDP Austria4

1.2GDP Switzerland4

1.3Comparison4

2) Unemployment Rate5

2.1Unemployment Austria5

2.2Unemployment Switzerland6

3) Inflation6

3.1Inflation Austria6

3.2Inflation Switzerland6

3.3Comparison7

4) Balance of Payments7

4.1Current Account Austria8

4.2Current Account Switzerland8

4.3Capital Account Austria9

4.4Capital Account Switzerland9

4.5Financial Account Austria9

4.6Financial Account Switzerland9

5) Conclusion9

References11

Appendices12

Austria vs. Switzerland

Introduction

Switzerland is an open economy with one of the highest standards of living in the world, low unemployment, and a highly skilled labor force. Switzerland's economy benefits from a highly developed services sector, led by financial services, and a manufacturing industry that specializes in high-technology, knowledge-based production. Switzerland is a net exporter. Major merchandise exports include machinery, chemicals and pharmaceuticals, watches, jewelry, and telecommunications, while the main services exports are in the banking and insurance sectors. Farm subsidies are the highest in the world, with some Swiss farmers receiving support equivalent to three-quarters of the value of production. Switzerland remains a safe haven for investors, because it has maintained a degree of bank secrecy, while the franc has traditionally been one of the world's strongest currencies. (Butschek 2011: 106)

Whereas on the other hand Austria's economy is closely tied to the other EU nations, and especially to the German economy. It comprises a large services sector, a sound industrial sector, and a small, but highly developed, agricultural sector. The country, which has been a member of the European Union's Economic and Monetary Union (EMU) since 1999, entered a recession in 2008 and the economy contracted by 3.6% in 2009. Prior to this, the country had enjoyed several years of solid demand for its exports and benefited from record employment growth in the first half of 2008. The Austrian economy has benefited greatly in the last decade from strong commercial relations, with central, eastern, and southeastern Europe, especially in the banking and insurance sectors. However, the Austrian banking sector was hard hit by the global financial crisis, and some of Austria's largest banks have required government support. The country faces a severe challenge in the future, even after the recession eases, as its ageing population and very low birth rate threaten to exacerbate labor and skills shortages in key sectors of the economy, such as manufacturing and services(Traxler 2011: 236).

1) Growth Rate

GDP Austria

The Gross Domestic Product (GDP) in Austria contracted 0.1 percent in the fourth quarter of 2011 over the previous quarter. Historically, from 1988 until 2011, Austria's average quarterly GDP Growth was 0.57 percent reaching an historical high of 1.70 percent in June of 1988 and a record low of -1.70 percent in March of 2009. Ever since the end of the World War II, Austria has achieved sustained economic ...