Medium-term Economic Growth Remains Subdued Due to Persistent Structural Weaknesses

Austria's economy is recovering slowly from the recession of 2023-24. Compared to other European countries, energy prices and unit labour costs have risen more sharply in Austria, causing competitive disadvantages, particularly for the energy-intensive export sector, to persist even in the medium term. The Austrian economy in 2026-2031 will therefore grow at a slower rate than the euro area average. WIFO expects average annual economic growth of 1.1 percent in 2026-2031 and trend growth (according to the European Commission's methodology) of 0.9 percent p.a. (Ø 2010-2019 +1.1 percent p.a.). Demographic change is intensifying the labour shortage. On one hand, this dampens the medium-term outlook, but on the other hand, it significantly reduces unemployment: after 7.4 percent in 2025, the unemployment rate is expected to decline to 5.7 percent by 2031. Due to the sharp rise in prices for petroleum products and natural gas caused by the war in Iran, the inflation rate is projected to reach 2.7 percent in 2026 and 2.3 percent in 2027, with the 2 percent inflation target not being met until 2028. Without the consolidation measures under the 2027-28 two-year budgetary plan, which has yet not been adopted, the deficit ratio averages just under 4 percent of nominal GDP over the forecast period, considerably above the 3 percent target, causing public debt to rise to 90 percent of nominal GDP by 2031 (2025: 81.5 percent).