Unprecedented fiscal (re)actions to ease the impact of the COVID-19 pandemic in Austria

Austria’s public finances – both, automatic stabilizers and discretionary measures – have played a major role in easing the impact of the COVID-19 pandemic on the Austrian economy. During the two lockdowns in spring and November/December 2020, discretionary fiscal measures were mainly aimed at supporting the health care system and mitigating the effects of the lockdowns. Measures adopted after the first lockdown provided classic stimuli to boost economic activity. Initiatives to promote private and public investments followed, which, ideally, support the transition to new technologies and ways of working and thus increase the Austrian economy’s long-term growth potential. Given the high uncertainty surrounding the economic outlook, the measures taken to contain COVID-19 might, however, be less effective than during normal times. Moreover, policy measures must be unwound with caution to avoid that crisis legacy issues, such as tax deferrals or accumulated debt once the moratoria are lifted, hamper the economic recovery. At the same time, the measures should be carefully designed and targeted to avoid overcompensation of private companies at the cost of society. While the unprecedented fiscal measures and automatic stabilizers built into the budget have left their mark on Austria’s public finances, their sustainability is currently not at risk. Nevertheless, as low interest rates might not stay around forever, the high debt ratio should be reduced in the medium-term in a socially and environmentally sustainable way.