After a strong rebound at the beginning of 2022, following the acute phase of the COVID-19 pandemic, growth slowed down since mid-2022 (0.2% q-o-q growth in 2022-Q3) on the back of a reduction in industrial output. This decline in industrial production is expected to have continued, leading to a technical recession with GDP growth estimated at -0.7% in 2022-Q4 and forecast at -0.2% in 2023-Q1. Currently, economic sentiment indicators as well as the Purchasing Managers' Index remain substantially below their long-term averages.
On an annual basis, solid GDP growth of 4.8% is estimated for 2022, essentially due to the unwinding of the COVID-19 crisis. Looking ahead, growth is set to benefit from increasing real disposable incomes as energy prices moderate and wages increase. However, labour shortages are currently at a very high level and, combined with falling industrial production and generally low economic sentiment, they are expected to restrain the growth momentum. Therefore, the Austrian economy is forecast to grow by 0.5% in 2023 and 1.4% in 2024.
Inflation is expected to stay elevated over the forecast horizon. In 2022, consumer prices were pushed upwards by high energy inflation. Moreover, wage agreements in recent months have resulted in wages settling slightly above the inflation rate, leading to additional pressure on prices. With energy inflation expected to moderate throughout 2023, consumer price inflation is forecast to settle at 6.6% (from 8.6% in 2022). In 2024, core price developments are set to moderate, with inflation projected at 3.6%.