In his recent update of Austria, the scope of the European rating agency referred to the higher than expected budget deficit. This increases the pressure to accelerate structural reforms. Scope sees a need for action, especially in the high pension and health costs.
Without reform efforts, public finances will continue to weaken in view of the weak prospects in economic growth, the rating agency warns Friday.
According to the International Monetary Fund (IMF), the aging -related costs will increase by approximately two percent of GDP by 2030. According to estimates from the Fiscal Council, a number of extraordinary pension increases between 2018 and 2023 have led to annual budget costs of approximately 1.3 billion euros. But also in a European comparison, Austria has high costs per head of the population in a European comparison, Scope appears to be.
Higher interest payments and defense expenditure
Moreover, the household balances of Austria are further under pressure due to rising interest payments and higher defense expenditure. In the case of interest payments, the scope assumes that they will increase from one percent of GDP in the previous year to 2029 to 1.8 percent of GDP. Defense expenditure, on the other hand, must rise from one percent of GDP in the previous year to 2032 to two percent of GDP.
The consolidation measures that have already been promised from 6.4 billion euros this year and EUR 2.3 billion in the following year is not sufficient in scope. “The total shortage of 4.7 percent of GDP in 2024 is much greater than the original government projection of 2.9 percent and also our earlier estimate of 3.3 percent,” Scope said. In the medium term, a budget deficit of approximately 2.5 percent of GDP is needed to stabilize the development of the debt.
Simple revival in sight
For this year, Scope expects a household deficit of four percent and for 2026 of around 3.7 percent of GDP. Apart from that, the rating agency for Austria’s economy this year predicts a decrease of 0.2 percent. It was only from 2026 that a slight recovery and economic growth of 1 percent can be expected – provided that credible reforms and gradual consolidation measures are determined without stopping the revival, says Scope.
The creditworthiness of Austria will still be supported by a rich and diversified economy, strong foreign trade and low private debts. Moreover, there is a solid banking sector and a debt structure with an average period of 11.71 years. This protects Austria against higher refinance costs, added the rating agency.
Source: Krone
I am Ida Scott, a journalist and content author with a passion for uncovering the truth. I have been writing professionally for Today Times Live since 2020 and specialize in political news. My career began when I was just 17; I had already developed a knack for research and an eye for detail which made me stand out from my peers.
