The weakening industry will slow Austria’s economic recovery next year. In their forecast presented on Thursday, economic researchers from Wifo and IHS expect real growth in gross domestic product (GDP) of 0.9 and 0.8 percent for 2024 and of 2.0 and 1.5 percent for 2025. Rising real incomes will support the economy. After two years of very high inflation, inflation in this country is expected to halve by 2024.
According to economists at the Economic Research Institute (Wifo) and the Institute for Advanced Studies (IHS), domestic economic output will contract by 0.8 and 0.7 percent respectively this year. Falling real incomes due to inflation and faltering global industrial production have weighed on domestic economic development this year.
Inflation is expected to halve by 2024
Inflation is expected to fall from 7.9 percent (Wifo) and 7.8 percent (IHS) this year to 4.0 or 3.9 percent (2024) and 3.1 or 3.0 percent (2025). Wifo expects continued inflation for industrial goods, food and especially services.
The recession has only minor consequences for the labor market
The economic downturn has so far had only a minor impact on the Austrian labor market. The unemployment rate according to the national definition rose from 6.3 percent in 2022 to 6.4 percent this year. The percentage has also increased because displaced people from Ukraine have been included in unemployment statistics since spring 2023. For the coming year, Wifo expects the unemployment rate to remain the same and the IHS expects an increase of 0.2 percentage points to 6.6 percent. In 2025, the rate is expected to drop again to 6.0 to 6.3 percent.
This year, Wifo expects a government financing balance as a percentage of gross domestic product (GDP) of minus 2.3 percent, the IHS expects a budget balance of minus 2.8 percent. For 2024, the institutes predict a government financing balance according to the Maastricht definition of minus 2.4 or minus 2.3 percent and for 2025 of minus 2 or 2.2 percent.
Rising expenditure is putting pressure on the government budget
Inflation-related rising expenditure on wages and salaries, pensions and indexed social benefits, as well as higher interest rates on the national debt, are putting pressure on the government budget. Compensation for the cold increase in wage and income taxes and the reduction in corporate tax rates will lead to less government revenue.
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.
