Decline in Energy Prices Improves Growth Prospects. Update of the Medium-term Forecast of the Austrian Economy 2023 to 2027

Josef Baumgartner

16.05.2023

Decline in Energy Prices Improves Growth Prospects

Update of the Medium-term Forecast of the Austrian Economy 2023 to 2027

Driven by global factors, the Austrian economy will recover rapidly from the stagflation in 2023. Real economic growth of 2,1 percent is expected for 2025. For 2023-2027, WIFO expects an average GDP growth of 1.6 percent p.a. (Ø 2010-2019 +1.5 percent p.a.).

Demographic change will intensify the labour shortage over the forecast period. This results in a noticeable drop in unemployment: the unemployment rate already fell below the pre-crisis level of 2019 in 2022 and is expected to reach 5.2 percent in 2027.

The strong upward price pressure on the international energy and commodity markets observed from the end of 2020 onwards culminated in 2022 in the highest inflation rate since the 1970s (8.6 percent). In 2023, inflation initially remains elevated (7.1 percent) although gradually approaching the 2 percent ECB target by 2027.

The projected deficit ratio of 1.8 percent of nominal GDP for 2023 declines to 0.4 percent by 2025 but rises to 0.8 percent of GDP by the end of the forecast period.