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Economy and Finance

Economic forecast for Austria

The latest macroeconomic forecast for Austria.

Indicators 2023 2024 2025
GDP growth (%. yoy) -0.7 0.6 1.4
Inflation (%. yoy) 7.7 4.0 3.0

The Austrian economy is estimated to have contracted by 0.7% in 2023, slightly more than expected in autumn, due to weaker private consumption and investments. Private consumption suffered from a loss in households’ purchasing power in a context of high inflation. Investments, especially in the construction sector, were constrained by the tightening of financing conditions. Moreover, industrial production was dragged down by high energy prices. In contrast, the tourism sector experienced a boom despite elevated prices. The economic slowdown in 2023 was most pronounced in the second quarter (-1.1% q-o-q). It continued in the third quarter (-0.5% q-o-q) before activity picked up in the fourth quarter (+0.2% q-o-q). The most recent economic sentiment indicators remain stable but are substantially below their long-term average.

The economic recovery is projected to be gradual, with growth increasing slightly in 2024 and picking up more strongly in 2025. Private consumption is expected to be the main growth driver, underpinned by stable levels of employment and strong real wage increases following recent collective wage agreements. As financing conditions are expected to ease over the forecast horizon, growth is also set to benefit from increasing investments from the second half of 2024 onwards. Import growth is projected to outperform export growth in light of the rebound of domestic demand and a delayed economic recovery in Austria’s main trading partners such as Germany. Therefore, trade is not forecast to contribute to growth. Overall, the Austrian economy is forecast to grow by 0.6% in 2024 and 1.4% in 2025. For 2024, this implies a downward revision of 0.4 pps. compared to the Autumn Forecast, while the forecast for 2025 remains broadly unchanged.

HICP inflation is estimated to have peaked at an annual rate of 7.7% in 2023 and is expected to gradually decline to 4.0% in 2024 and 3.0% in 2025, broadly unchanged compared to autumn. The rapid slowdown in 2024 is driven particularly by a stabilisation of energy prices at lower levels. Wage growth is set to temporarily exert a certain upward pressure on prices, notably in services. However, corporate profitability has been strong in the recent past, hence there should be room to partly accommodate wage growth.