The Austrian economy is growing significantly less than expected this year due to the weakening construction and industrial sectors. In their forecast for 2024 presented on Friday, the Wifo and IHS institutes expect real economic growth of only 0.2 and 0.5 percent respectively. In December they had predicted an increase of 0.9 and 0.8 percent respectively. This threatens the domestic economy with stagnation, but inflation is expected to more than halve.
After two years of very high inflation, inflation is expected to fall to 3.8 to 3.5 percent this year. Next year, economic researchers from the Economic Research Institute (Wifo) and the Institute for Advanced Studies (IHS) expect inflation to fall to 2.7 and 2.6 percent respectively. According to the IHS, inflation in Austria will therefore remain well above the eurozone average for an extended period.
The high interest rates remain a burden
According to Wifo, high interest rates are currently weighing on both investment demand and demand for construction services. With monetary policy easing, including interest rate cuts by the European Central Bank (ECB) expected from mid-2024, the economy should get back up to speed in both the eurozone and Austria.
Real consumption is expected to rise by 1.2 percent (Wifo) and 1.4 percent (IHS) this year and exports are expected to increase by 1.2 percent and 1.6 percent. Economic researchers assume real growth in Austria’s gross domestic product (GDP) of 1.8 to 1.5 percent in 2025.
Unemployment is rising again
The economic weakness is leaving its mark on the domestic labor market. Unemployment has risen again since April 2023 compared to the previous year. The unemployment rate (according to the national definition) was 6.4 percent last year and is forecast to rise to an annual average of 6.7 percent (Wifo) or 6.9 percent (IHS) in 2024 and again to 6 .5 percent (Wifo) or 6.9 percent (IHS). 6 in 2025, .6 percent decrease.
When it comes to the state’s budget deficit, Wifo and IHS’s predictions differ considerably. The economic research institute expects a financing balance as a percentage of GDP of minus 2.9 percent for 2024, while the Institute for Advanced Studies expects only minus 2.2 percent. Last year the budget balance was minus 2.4 percent.
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.
