Global Trade Conflicts, Fiscal Austerity and Structural Issues are Restraining Economic Growth in Austria

The upturn in the eurozone from 2026 onwards, driven by Germany's expansionary fiscal policy, will also gradually help the Austrian economy out of recession. After –0.3 percent in 2025, WIFO expects real economic growth of 1¼ percent p.a. for 2026-2029 (average 2010-2019 +1.6 percent p.a.). However, as fiscal policy in Austria is geared towards budget consolidation and the spillover effects of the German infrastructure and defense package will be low, Austria's economy is likely to grow by ¾ percentage points p.a. less than the eurozone in 2025-2029. Demographic change will exacerbate the labour shortage in the forecast period. While this will dampen trend growth, it will also reduce unemployment: the unemployment rate is expected to fall to 6 percent by 2029 (2025: 7.3 percent). The strong inflation observed since the end of 2021 (Ø 2022-23 +8¼ percent p.a.) continues to slow significantly (2025: 2.7 percent) and reaches the 2 percent target of the European Central Bank (ECB) permanently in the course of 2026.