Heightened Cyclical Risks. Economic Outlook for 2005 and 2006

The short-term business outlook in the euro area is surrounded by considerable uncertainty. Recent gains in exports and profits have so far not translated into higher investment and consumer spending. High oil prices constitute a further risk element. Owing to the positive incentives from the tax reform, the Austrian economy is performing better than the euro area as a whole. GDP is projected to expand at a steady 2¼ percent p.a. in 2005 and 2006. The rate of unemployment is nevertheless unlikely to decline, given the massive increase in labour supply.