The recovery of the Austrian economy is coming to an abrupt end, not least because of the war in Ukraine. The economic experts at the Austrian Institute for Economic Research (WIFO) and the Institute for Advanced Studies (IHS) still expect gross domestic product to rise by 4.7 and 4.8 percent respectively this year. After that, though, things look bleak.
The war in Ukraine has led to a drastic rise in energy prices. But the sharp rise in raw material costs has also pushed up inflation. This and the high degree of uncertainty are slowing the expansion of the global economy. The economic experts therefore only expect low growth with relatively high inflation. The Wifo assumes an economic growth of 0.2 percent for next year 2023, the IHS of 0.3 percent.
Much depends on the gas supply
According to IHS, a slight revival is not expected until spring 2023 – provided gas supplies are maintained. The IHS predicts that private consumption should remain the growth engine this year with an increase of 4.7 percent. Wifo is more cautious for the current year: Households with limited liquidity would reduce their consumption. Due to the relatively high inflation, an increase in the number of these households is expected. On the other hand, households that do not have liquidity problems would consume more. After all, the already negative real interest rate continues to fall due to inflation, which stimulates consumption. Wifo expects consumer spending to increase by 3.8 percent next year and by one percent in 2023.
Inflation will slowly level off
However, the predicted flattening of economic momentum will only slowly affect prices, Wifo predicts. The institute therefore expects inflation to fall to 6.6 percent. The IHS, on the other hand, has a less optimistic forecast of 6.8 percent inflation for the coming year. According to the economic researchers, high consumer price inflation will lead to higher wage agreements, especially in 2023. The IHS expects gross real wages to fall by 4.2 percent this year. A small increase is not expected until 2023.
Unemployment rates are still positive. However, Wifo and IHS agree that unemployment is likely to rise from about 6.4 percent to 6.7 percent in the coming year.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
