Energy Price Shock and Trade Conflicts are Hampering Austria's Foreign Trade

The "Research Centre International Economics" (FIW) published its seventh annual report on the "State of Austrian Foreign Trade" on Wednesday, 19 May 2026. The report analyses the international framework conditions and contains a short-term forecast of Austrian foreign trade developments for the years 2026 and 2027. For the first time, the study also examines in detail monetary foreign trade relations and medium-term changes in the global trading system.

This year's analysis focuses on the economic consequences of geopolitical tensions – in particular the protectionist trade policy of the USA, the war in the Middle East and the resulting energy price shock.

Exports down, imports up significantly

Austrian goods exports performed weakly in 2025, falling by 0.5 percent in nominal terms. The main factors were weak demand from key markets such as Germany and the rest of the euro area, particularly for capital goods, as well as increasing geopolitical and trade policy uncertainties. In addition, intensified international competition, including from China, weighed on export performance. Although the first signs of stabilisation emerged towards the end of the year, these were not sufficient to offset the decline for the year as a whole.

Imports of goods, by contrast, performed much more strongly, rising by 4.8 percent in real terms. The main drivers of growth were the recovery of equipment investment and domestic demand for durable consumer goods, in particular car imports as well as pharmaceutical products and precious metals. Imports from Switzerland and China recorded particularly strong growth.

As a result of the divergent trends in exports and imports, the trade balance in goods deteriorated significantly. The trade deficit amounted to 6.6 billion € in 2025. Negative volume effects could only be partially offset by favourable terms-of-trade effects.

Subdued outlook for 2026 and 2027

For the years 2026 and 2027, the FIW forecasts only a gradual recovery in Austria's foreign trade. In the main scenario, exports (goods and services) are expected to grow by 1.5 percent in 2026 and 2.2 percent in 2027. Imports will also increase only moderately, by 1.0 percent in 2026 and 2.0 percent in 2027.

However, the forecast is subject to a high degree of uncertainty. Key risk factors remain the economic consequences of the war in Iran, rising prices for fossil energy sources, disruptions to global supply chains, and increasing uncertainty regarding investment and consumption decisions.

Against this backdrop, the report distinguishes between a main scenario and a pessimistic alternative scenario. The central assumption concerns the development of prices for crude oil and natural gas. This depends largely on the extent to which the global energy supply is disrupted by restrictions in the Strait of Hormuz or by destroyed production capacities in the Middle East.

In the main scenario, the FIW assumes a crude oil price of 88 $ per barrel (Brent) in 2026 and 76 $ in 2027. Natural gas prices are expected to be 49 € per MWh in 2026 and 37 € in 2027. In the pessimistic scenario, by contrast, a significantly sharper and more prolonged rise in energy prices is assumed. In this case, the crude oil price would rise to 106 $ per barrel in 2026 and stand at 80 $ in 2027. Natural gas prices would rise to 64 € per MWh in 2026 and 58 € in 2027.

The impact of the pessimistic scenario on the external economy is considerable: growth in real exports would amount to just 0.3 percent in 2026 and only 1.1 percent in 2027. Imports could even decline slightly in 2026 before rising moderately again in 2027. At the same time, the trade balance would deteriorate significantly more under the pressure of higher energy prices.

Weaker international environment

The international environment also remains challenging. The global economy grew by 3.4 percent in real terms in 2025, but a slight slowdown to 3.1 percent and 3.2 percent is expected for 2026 and 2027 respectively. Whilst the economy of the USA is growing at a comparatively dynamic pace, the European Union and, in particular, Germany – Austria's most important export markets – are lagging significantly behind. Global trade is also expected to slow following a strong rise in 2025.

Focus on monetary policy and structural changes

For the first time, the Annual Report also provides a detailed analysis of monetary external economic relations. The focus is on inflation trends, monetary policy strategies and exchange rate dynamics in the major economies.

The monetary policy landscape in 2025 was characterised by falling inflation, moderate economic growth and persistent geo-economic uncertainties. With the energy price shock following the war in Iran, monetary policy once again came into sharper focus at the start of 2026.

For Austria, the real effective exchange rate based on unit labour costs shows a smaller appreciation than the euro area average. This points to a slight improvement in price competitiveness, though this is put into perspective by the strong inflation-driven appreciation in previous years.

Furthermore, the report examines medium-term changes in the global trading system. The focus is on rising trade policy uncertainty, increasing protectionist measures and the structural consequences of geopolitical conflicts for the international division of labour.

These developments are driving a reorganisation of global supply chains in the sense of "friendshoring" and reinforcing the formation of blocs in world trade. For the European Union, this increasingly raises the question of how economic openness, security of supply and strategic resilience can be better reconciled in the future.

Diversification and resilience are gaining in importance

Current developments underscore the importance of an active risk-reduction strategy at European and national level. The focus is on diversifying supply and sales markets, deepening trade relations with rule-based partners, expanding renewable energy, and building more resilient international supply chains.

The recent energy price shocks and the increasing fragmentation of world trade demonstrate how important it is to reduce structural dependencies at an early stage. In addition, the FIW recommends a broad-based industrial strategy to specifically reduce critical dependencies on raw materials, energy and digital technologies, whilst simultaneously strengthening Europe's long-term competitiveness.