While the European Commission predicts ‘modest growth’ for the EU, the domestic economy will shrink by 0.6 percent this year. This means that the Austrian budget deficit clearly exceeds the permitted limit of three percent.
The “uncertainty and downside risks to the outlook” have increased, the European Commission emphasizes in its publication. Russia’s protracted war of aggression against Ukraine and the intensification of the conflict in the Middle East would increase geopolitical risks and threats to energy security. “A further increase in protectionist measures by trading partners could affect global trade and put pressure on the EU’s very open economy,” the Brussels authority says only indirectly about the punitive tariffs on many European products announced by newly-elected US President Donald Trump.
According to the autumn economic forecast presented in Brussels on Friday, the EU economy is expected to grow by 0.9 percent this year, and by 0.8 percent in the eurozone. The domestic economy is forecast to contract by 0.6 percent this year before returning to a narrow 1.0 percent growth path in 2025.
Austria is struggling with a budget deficit
EU Commissioner for Economic Affairs Paolo Gentiloni also referred to the Austrian budget deficit in his press conference: “According to our forecast, there is a trend towards a slight increase in debt and the budget deficit in the coming years.” the years 2024: “By 2026, this will exceed three percent of economic output, while public debt will rise above 80 percent,” the commission said in its report. A budget deficit of 3.6 percent is expected this year, 3.7 percent next year and 3.5 percent for 2026.
This means that the deficit is well above the so-called Maastricht limit of three percent. New debts of up to three percent of gross domestic product (GDP) are permitted; at the same time, a Member State’s debt level may not exceed 60 percent of economic output. If this is not respected, the European Commission can initiate an excessive deficit procedure.
Brunner has adjusted the deficit forecast upwards
Gentiloni said on Friday that he was in contact with Austrian authorities and would speak to Finance Minister Magnus Brunner (ÖVP) in the coming days: “It is important that the Commission takes the situation into account.” Speaking to journalists in Vienna on Thursday, Brunner defended his budget deficit, which was revised upwards shortly after the National Council elections. At the beginning of October, the Ministry of Finance increased its deficit forecast for the 2024 budget to 3.3 percent of GDP. The economic researchers from Wifo and IHS recently expected 3.7 and 3.5 percent respectively.
Inflation is falling
The weakening economy is accompanied by further falling inflation rates: overall inflation in the eurozone is expected to almost halve from 5.4 percent in 2023 to 2.4 percent in 2024. Inflation is expected to fall further to 2.1 percent in 2025 and to 1.9 percent in 2026. Percent. This would mean that the European Central Bank’s goal of keeping inflation below 2 percent would again be achieved. In the EU, overall inflation will fall from 6.4 percent to 2.6 percent in 2023, and by 2.4 and 2.0 percent in subsequent years. In Austria, prices are expected to rise by 2.9 percent this year, followed by 2.1 and 1.7 percent respectively.
Unemployment remains fairly stable in all areas: 6.1 percent is expected for the EU this year, 5.9 percent next year, and for the eurozone 6.5 and 6.3 percent respectively. With 5.3 percent in both years (according to Eurostat’s definition), Austria is slightly below the EU average.
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.
