After a short recession in the winter, Wifo and IHS expect the economy to “rebound” in the second quarter of 2023. Inflation has passed its peak.
According to Wifo boss Gabriel Felbermayr, the domestic economy will contract in the last quarter of this year and the first of next year, “but growth will return in the spring”. The institutes therefore expect a small increase in GDP (gross domestic product) of 0.3-0.4 percent for 2023, which is de facto stagnation.
Inflation is falling slightly, mainly because energy prices are no longer so high. But because the price increases for many products will not have their full effect until next year, average annual inflation will still exceed 6 percent.
On the other hand, after the recession, purchasing power will increase sharply this year and private consumption will stabilize. After the minus in 2022, real wages (i.e. minus inflation) will rise by 2.7% next year and even by 3.9% in 2024. This helps to get back on a “normal” path during growth. The propensity to save, which reached record highs during the Corona period, will decrease further. Despite the weakness in the global economy, exports should “bounce back” and the industry is recovering. Unemployment remains at a relatively low level.
Of course, there are downside risks to the forecasts, especially if the war in Ukraine were to escalate again. Public finances benefit in the short term from high inflation because it “increases the tax base by 10 percent” (Felbermayr). However, both Wifo and IHS think that the deficit (3.3% of GDP this year) will only be around 2% in the coming years. This should provide sufficient room to invest more in the energy transition. Felbermayr: “We don’t do enough there.”
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.
