The Austrian economy contracted more than expected in the second quarter of 2023. According to calculations by Statistics Austria, real gross domestic product (GDP) fell by 1.1 percent from the same quarter of the previous year, according to a Friday broadcast. If this trend continues, Austria risks falling into recession in the next quarter.
The current decline is mainly due to the declining economic output of the private sector. At the end of July, Wifo still assumed a minus of 0.3 percent.
First drop since the Corona crisis
“Nevertheless, the Austrian economy is 3.2 percent above its pre-coronavirus level,” explains Director General Tobias Thomas of Statistics Austria. Compared to the first quarter, the Austrian economy contracted by 0.7 percent. After the strong economic upswing after the end of the Corona crisis had already weakened from the second half of 2022, a decline was recorded in the second half of 2023 compared to the same quarter of the previous year (minus 1.1 percent) and compared to Q1 2023. Q2 2023 for the first time.
Is Austria slipping into a recession?
Admittedly, a recession has not yet been reached, as the economy does not have to grow or shrink for two quarters in a row from the previous quarters, seasonally adjusted (excluding holidays). The now unexpectedly sharp fall in GDP in particular has made economic researchers frown. If the trend continues into the next quarter, Austria has by definition entered a recession.
In terms of inflation, it clearly lags behind most euro area countries
In addition, there is the sluggish development in terms of inflation: inflation has increased continuously throughout 2022, reaching a peak of 11.2 percent in January 2023 and showing a downward trend since then, most recently at an expected 7.5 percent. percent in August 2023. (quick estimate from Statistics Austria). Above all, increases in energy prices initially contributed to the sharp rise in inflation.
However, more than a year after the start of the energy price crisis, their influence has diminished significantly, while the continued price increases for services are becoming increasingly important. The higher inflation in Austria compared to the euro area can mainly be explained by the price development of household energy, which is now falling faster in many Western European countries.
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.
