The economy of the Austro-Hungarian Empire is a complicated matter, which has seen many changes in the decades since the formation of the Dual Monarchy.
The Austro-Hungarian GDP for 1912 was $2,238, ranking Austria-Hungary as one of the less developed Great Powers, and lower-middle developed European nation. The Empire has, however, seen great growth since 1867, and especially so in the last decade, experiencing several boom years in a row, and jumping from the 1900 GDP/capita of $1,750 despite the great demographic growth. The gross national product has also been growing exceedingly well, with an average growth of 1.76% per year since 1870.
Despite the positive trends, the economy is still significantly lagging behind the economies of other developed nations, such as Germany, Great Britain and the United States. The lag is primarily the result of late sustained industrialization, which had begun in a period where other nations had already begun to take primacy on the markets due to their own economic supremacy.
Several problems facing the economic development of the Austro-Hungarian Empire are:
- Political divisions in the Empire - while the situation has improved drastically in this field in the last decade, continuing divisions in the Empire threaten its stability and prospects for growth.
- The need to maintain a large active force diverts the money from economic development into military upkeep and development.
- The disproportionate development of the Empire - while the regions of Austria and Bohemia rank among the most developed parts of the civilized world, with many centers of heavy industry located there, the regions of Galicia, Bukowina and some parts of Hungary rank among the least developed parts of Europe. While the situation has improved in the last decade, with large amount of funds set aside for economic development in these regions, the pace of development in these regions must pick up in order to allow for sustained industrial development of the Empire.
However, the economy on the whole has been showing great improvements in many areas. The heavy industry has been prospering in Austria and Bohemia, with lighter industries being developed in other parts of the country. Modernisation had begun on a large scale since the 1880s, and the Empire had become one of the technological leaders in various industrial branches. In particular, the Austro-Hungarian Empire is renowned for its machine building industry, electric power industry, locomotive industry, automotive industry and precision mechanics industry, as well as for its arms industry, with Škoda Works becoming one of the largest producers of high-quality artillery pieces in the world.
On the other hand, the fertile areas of the Pannonian Plain has made Hungary the breadbasket of Empire and Europe. Great areas of Hungary are used for production of wheat, oat, sugar, corn and other cultures, and even for production of high quality wines in central Hungary (Tokaj region) and Croatia-Slavonia (the Požega Valley - "Vallis Aurea" and eastern Slavonia). Also renowned are the Hungarian horse breeders, producing some of the finest horse breeds in the world, with the most renowned of them being the Lipizzaner - the horses of the Spanish Riding School in Vienna. Also present are large concentrations of food processing industries in the major cities of Hungary. Finally, Austria-Hungary is renowned as the world's largest producer of beer, which is almost synonymous with the region of Bohemia. The most renowned beers, the Pilsner Urquell and the Budweiser Budvar, have been both produced since the 13th century.
The most important trading partner is Germany (1910: 48% of all exports, 39% of all imports), followed by Great Britain (1910: almost 10% of all exports, 8% of all imports). Trade with the geographically neighboring Russia, however, has a relatively low weight (1910: 3% of all exports /mainly machinery for Russia, 7% of all imports /mainly raw materials from Russia). Trade with other nations, though steadily growing, is still relatively low.
The main means of transportation in the Empire is the railway, with a large network amounting to 45,000 km of rail spreading to every part of the Empire, with river traffic important as well, especially for trade. The world's largest inland shipping company in the world, the Donau-Dampfschiffahrt-Gesellschaft is headquartered in Austria-Hungary, and operates mostly on the Danube. The port of Trieste is by far the largest port in the Empire, with the port of Rijeka being rapidly developed (since the 1880s, Rijeka has been the second largest port). Another important port is Pula, though its significance mainly stems from its status of the main port of the Austro-Hungarian Navy.
Natural resources are in abundance in the Empire, with great amounts of all metals present in the Empire. In addition, large amounts of coal are present in the Carpathians and in Bosnia, and oil, the fuel of the future, is located in large amounts in Transylvania region of Hungary. Great natural wealth ensures the further industrial development of the Empire.