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Experts predict Austria’s inflation to reach 2.1 per cent this year as the consumer price index (VPI) reached a new low.

Prices and exports on the rise

Experts predict Austria’s inflation to reach 2.1 per cent this year as the consumer price index (VPI) reached a new low.

The domestic VPI, which especially considers products of daily demand, was three per cent in the first month of this year. This means that Austrians’ drugstore and supermarket shopping expenses rose by three per cent from January 2011 to January 2012. The development was the lowest increase in a year, researchers said.

The VPI was created to establish an indicator which emphasises the costs of the middle class since the inflation index also takes the price of limousines and various repairs which do not have to be paid on a daily basis into account. Especially two-digit price hikes for car petrol and mineral oil fuelled the VPI in January.

The Institute for Economic Research (WIFO) said yesterday (Weds) it expected the Austrian inflation to reach 2.1 per cent in 2012 after prices soared by 3.3 per cent from 2010 to 2011. Especially the struggling European economy will help to calm down the spiralling prices, according to analysts – who warned from unforeseeable developments on the global oil trading markets.

WIFO recently announced that the gross domestic product (GDP) declined by 0.1 per cent from the third to the fourth quarter of 2011. The research group added it saw a growth potential of 0.4 per cent for the domestic economy from 2011 to 2012. An improvement of 1.6 per cent from 2012 to 2013 and of two per cent from 2013 to 2014 is possible, WIFO added.

Austrian and international experts are at odds over whether the various uncertainties in the Eurozone would affect Austrians’ spending power and harm the domestic economy. Meanwhile, Austria’s export industry seems to be in an excellent condition. The Economy Chamber (WKO) announced on Monday that Austrian firms sold goods and services worth 122 billion Euros to foreign partners in 2011. WKO officials said this was an increase of 12 per cent compared to the year before – and an all-time record.

At the same time, the trade deficit widens as imports were 8.2 billion Euros higher than exports – a gap around twice as high than in 2010. Experts identified rising expenses for energy products and services and fuel as a crucial factor for the soaring difference between the value of imports and exports.

Austrian People’s Party (ÖVP) Economy Minister Reinhold Mitterlehner’s appeal from last May on enterprises to focus on emerging markets like China, India and countries in South America apparently fell on deaf ears as 80 per cent of exports went to other European countries. The WKO now wants to increase the value of services sold to companies and public institutions abroad but also warned of a "weak and tired Europe while Asia catches up".

Around 40,000 companies with headquarters in Austria do business abroad. German firms are the most important partners of many of them. Europe’s most powerful economy acquired Austrian products worth more than 35 billion Euros in 2011, up by 11 per cent compared to 2010. Austrian businessmen are carefully observing decision-making in Italy. The debt-stricken country is Austria’s second-most important trade partner.

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