Outlook for 1989 and 1990: Cyclical Boom To Continue
For almost two years now the Austrian economy has been performing better than at any time in the 1980's. Growth of real GDP will again reach 4 percent in 1989 and probably 3 percent in 1990. Manufacturing industry has a comfortable backlog of unfilled orders assuring high capacity utilization well into next year and firms express optimism as regards sales and profit prospects. A strong upswing of private investment has been set in motion this year and will keep its momentum in 1990. Households have seen their disposable incomes rising considerably due to the tax reform. Together with higher wages and gains in employment, this will allow private consumption to grow by over 3 percent. Domestic developments do not provide major risks for the bright outlook. Inflation, while somewhat accelerating, remains under control and the current account is in broad equilibrium. Capacity shortages are unlikely to emerge on a larger scale due to buoyant investment and elastic labour supply. On the international level, final demand is still strong and broadly based among its different components. Growth is expected to slow gradually under the effect of rising interest rates. However, the size of the reaction by investors and consumers, particularly after the latest round of rate increases in Europe, is an element of uncertainty surrounding the forecast.