The financial ramifications of the pandemic and the war in Ukraine are already evident in Austria – and there seems to be no concrete end in sight. According to a current estimate by Bank Austria, the inflation wave is likely to accelerate even further in the coming months, pushing inflation to more than seven percent. This evokes memories of the oil price crises of the 1970s.
According to a quick estimate by Statistics Austria, inflation was already 6.8 percent in March – and thus again at a record level: it was last this high in November 1981. The war in Ukraine in particular led to a further acceleration in raw material prices. , which has fueled inflation even more, Stefan Bruckbauer, Bank Austria’s chief economist, said Thursday.
general economy weakened
The institute’s economic indicator also fell to its lowest level in a year in March. While the easing of pandemic measures has put Austria’s economy back on a growth path in the first quarter, sanctions against Russia and high energy prices are forecast to dampen the pace of the recovery, especially in the second and third quarters of 2022.
They still believe that economic growth of 3.6 percent is possible by 2022. In 2023, Austria’s GDP is expected to grow by 2.6 percent.
Memories of the Oil Price Crisis
The currently high inflation rates evoke memories of the 1970s and 1980s for some. The oil price crises of 1973 and 1979/1980 caused inflation worldwide to soar. At the time, central banks tried to fight inflation with high interest rates.
While economic researchers assume that high inflation could become permanent, the European Central Bank is sticking to its historically low key rate of 0.0 percent. At the same time, however, European currency watchdogs confirmed that they were moving towards an end to their ultra-easy monetary policy. Economists believe that a first rate hike is still possible this year.
Source: Krone
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