Competitive Disadvantages Slow Down Growth

Austria's economy is slowly recovering from the recession of 2023 (–1.0 percent) and 2024 (–0.6 percent). Compared to other European countries, energy prices and unit labour costs are higher in Austria. This will put the energy-intensive export industry in particular at a competitive disadvantage in the medium term. The Austrian economy will therefore grow by 0.2 percentage points p.a. less than the euro area average. According to the European Commission's method, trend growth is +¾ percent p.a. (Ø 2010-2019 +1.1 percent p.a.). WIFO expects real economic growth of 1 or 1½ percent for 2025-26 and 1¼ percent p.a. for the entire forecast period 2025-2029 (average 2010-2019 +1.6 percent p.a.). Private consumption is likely to pick up from 2025, increasing by an average of 1½ percent p.a. in the forecast period and thus supporting economic growth. Demographic change is exacerbating the labour shortage. On the one hand, this is clouding the medium-term growth prospects, but on the other hand it is noticeably dampening unemployment: the unemployment rate already fell below the pre-crisis level of 2019 in 2022 and is expected to be 5.7 percent in 2029. The strong inflation observed since the end of 2021 (2022 +8.6 percent, 2023 +7.8 percent) will slow to 3.1 percent in 2024. The inflation rate will reach the ECB's 2 percent target by mid-2025 and is likely to remain there in the medium term (Ø 2025-2029 +2 percent p.a.). The deficit ratio is 4 percent of nominal GDP in 2025 and an average of 3¾ percent over the entire forecast period. As a result, government debt increases from 80 percent (2024) to 86½ percent of nominal GDP by 2029.