High energy prices are likely to dampen growth in Austria not only in the short but also in the medium term. According to the Economic Research Institute (Wifo), there will be stagflation in 2023: high inflation with low growth. After that, the domestic economy will only slowly regain momentum – from 2023 to 2027, annual GDP growth is expected to average only 1 percent. Electricity and gas prices remain about four to five times higher than before 2020.
Wifo expects gross domestic product (GDP) to grow by 0.2 percent next year. According to the experts, the high energy prices would limit the production possibilities and competitiveness of energy-intensive companies in particular.
At the same time, the high prices would depress purchasing power and thus consumption. Real private consumption is likely to grow by only a modest percentage in 2023.
Inflation of 6.5 percent expected
In addition to the weakening growth, inflation will remain high in 2023 due to energy prices. Inflation is expected to be 6.5 percent. This is what is known as stagflation. After that, energy prices and thus inflation should fall again, but an inflation rate of 2.4 percent is still expected in 2027.
The medium-term slowdown in growth is also likely to affect employment dynamics. For dependent workers, an annual increase of 0.8 percent is predicted. Meanwhile, the unemployment rate is expected to fall from 6.7 percent in 2023 to 6.4 percent in 2027.
With regard to the national debt, Wifo sees an improvement in the ratio due to the increase in nominal GDP from 74.1 percent in 2023 to 67.8 percent for 2027. According to the forecasts, the new debt will also level off in 2027 at 1.3 percent of GDP. A new debt of 1.7 percent is expected for 2023.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
