International market scepticism resulting from the sovereign debt crisis spread across almost all of Europe during the course of 2011, including Austria. In the end, the rating agency Standard & Poor’s downgraded Austria's credit rating from AAA to AA+ at the beginning of 2012 and Moody's reduced its outlook to negative. This considerably increased efforts to cut future government spending, which is likely to have a dampening effect on the economy. The Austrian export industry will also be negatively affected by the restrictive economic policies of important trading partners, such as Italy and Hungary. According to WIFO (Österreichisches Institut für Wirtschaftsforschung, Austrian Institute for Economic Research), GDP grew by 3.2% in 2011 based on data available as of January 2012. A significantly lower GDP growth rate of 0.4% is expected for 2012.

The labour market situation can also be expected to deteriorate due to the slowdown in the economy. According to WIFO projections, employment growth will slow in 2012, accompanied by an increase in the unemployment rate to slightly more than 7%.

Like many European economies, Austria is confronting increasingly significant changes in its demographic structure. Unlike previous years, the number of deaths is likely to exceed births for the first time in 2012. And while the number of individuals turning 18 is falling, the number celebrating their 65th birthday is rising. Using these two ages as indicators for entry and exit into the workforce also reveals demographic challenges in this area.

According to WIFO, there is still no doubt about the stability of the Austrian and international banking systems. The possibility that banks might limit lending due to a need to satisfy equity capital ratios is considered a manageable risk.

With respect to the Austrian insurance industry, the Austrian Association of Insurance Companies (VVO) is expecting premium growth of 1.3% in 2012. The decline of 1.7% (based on present available data) in the previous year was worse in comparison due to the drop in single-premium business.

The potential for future growth in the life insurance sector is currently being overshadowed by financial market uncertainty and a general tendency to use up savings. Growth in the life insurance sector is also highly dependent on legislation. As of the editorial deadline, for example, a draft law for a government austerity package was being discussed in Austria that would cut in half government funding for government-sponsored pension plans starting in 2012.

VVO expects a slight decrease of 0.5% for the life insurance sector in 2012 compared to the previous year. Due to the reduction in government funding for government-sponsored pension plans mentioned above, VVO expects income from regular premium policies to decline by 0.6% compared to 2011. Single-premium policies, which recorded a sharp drop in 2011, are expected to stabilise at the current level in 2012. Health insurance premium income is expected to increase by 3.2% in 2012, essentially the same rate as the previous year.

VVO expects premium growth of 2.5% in the property and casualty segment in 2012 (as compared to 2011: +2.9%). After many years of declining premiums and zero growth in 2011, motor vehicle third-party liability premiums are once again expected to grow slightly by 0.3%. Motor vehicle own-damage and passenger insurance is expected to grow by 2.5% in 2012.