Structural Problems Dampen Growth

Austria's economy continues to recover sluggishly from the recession of 2023-24. Compared to other European countries, energy prices and unit labour costs have risen more sharply in Austria, which has placed its energy-intensive export industry in particular at a competitive disadvantage also in the medium term. As a result, the Austrian economy will grow by ¼ percentage point p.a. less than the euro area average in 2026-2030. WIFO expects real GDP growth of 1 percent p.a. According to the European Commission's methodology, the annual trend growth rate is ¾ percent (average 2010-2019 +1.1 percent p.a.). Private consumption is expected to grow by an average of 1 percent p.a. during the forecast period, thereby supporting economic growth. Demographic change will intensify labour shortages. On the one hand, this is dampening the medium-term growth outlook, but on the other hand, it is significantly reducing unemployment: after 7.5 percent in 2025, the unemployment rate is expected to decline to 5.9 percent by 2030. The strong inflation observed since the end of 2021 will slow to 2.4 percent in 2026. By mid-2027, the inflation rate should reach the European Central Bank's target and remain at 2 percent in the medium term. The deficit ratio averages 3¾ percent of nominal GDP over the forecast period, well above the 3 percent target. As a result, government debt will rise to 88¼ percent of nominal GDP by 2030 (2024: 80 percent).