Subdued purchasing power, high energy prices and sharp interest rate increases lead to a mild recession in Austria in 2023; real GDP is expected to contract by 0.8 percent. In 2024, strong real income growth and a pick-up in world trade will ensure an economic recovery (real GDP +1.2 percent). In construction, however, the recession will intensify.

In 2021, there had been signs of an increase in agricultural prices due to the international economic upturn. Following the invasion of Ukraine by the Russian Federation, there was great uncertainty on all markets for internationally traded goods. This cause a sharp surge of prices. Agricultural goods, which were exported by Ukraine on a large scale, were affected first, then almost all other goods. The rise in prices led to high increases in the production value of Austrian agriculture in 2022, although the volume produced hardly increased. Despite the significantly more expensive production, revenues clearly outweighed costs, allowing a strong increase in income. The situation was similar in forestry. However, the favorable situation in the agricultural commodities market belies the challenges facing agriculture. According to scenario analyses, fundamental changes such as a reduction in cattle numbers are needed to reduce greenhouse gas emissions. This would be accompanied by a significant reduction in agricultural output.

In 2022, unit labour costs in Austrian manufacturing increased by 2.2 percent year-on-year. This implies a significant improvement in relative unit labour costs, both compared with the weighted average of all trading partners (–3.3 percentage points) and with EU trading partners (–1.7 percentage points). Relative unit labour costs also improved compared with Germany, the most important trading partner (–1.4 percentage points). This development vis-à-vis our trading partners is being driven by a weaker increase in labour costs coupled with a stronger rise in productivity. The favourable exchange rate development had a supporting effect. When interpreting the data, long-term comparisons still need to take into account country-specific differences in the COVID-19 aid measures. The data for 2022 may also have been distorted by the different international approaches to cushioning high inflation.

The year 2021 was characterised by an economic rebound (real GDP +4,6 percent) as the COVID-19 pandemic subsided, and an accompanying 4.9 percent increase in greenhouse gas emissions. In 2022 emissions fell significantly by –6.4 percent according to initial estimates, although economic output grew by 4.9 percent. The decoupling of economic growth and emissions development was primarily due to price-related energy savings. In addition, weather-conditions also influenced greenhouse gas emissions. For example, a mild winter curbed heating demand and a dry summer reduced hydropower output. The significant increase in energy prices due to the Ukraine war drove up expenditure on fossil energy imports. The capacity of the renewable energy technologies photovoltaics and wind energy was increased by 15.9 percent. This year's special topic deals with the current status of the legislative implementation of the EU's "Fit for 55" package.

The results of the WIFO-Konjunkturtest (business cycle survey) in July show a significant deterioration of economic assessments across all sectors. Economic assessments and expectations were particularly sceptical in manufacturing. Capacity utilisation declined in all sectors. In the total economy, as in previous quarters, the "shortage of labour force" was the most important obstacle to business activity, although "insufficient demand” Increased further in importance. Sales price expectations continue to show a downward trend.

The monitoring of selected indicators of digital transformation in various subsectors of the economy and society shows that Austria still ranks in the middle of the EU 27 in terms of digital transformation. The significant lag in the use of ultra-fast broadband Internet by private households or the basic digital skills of Austria's population in an EU comparison is also reflected in the low penetration of digital platform work. This is most likely to be found in the service sector, especially in accommodation and food service activities, and contributes to cost and time savings.

After strong growth in the first half of 2022, the Austrian economy entered a phase of stagnation that will continue in 2023. Manufacturing and closely related sectors are now in recession, while market-related services are expanding overall. This dichotomy in the business cycle is not expected to abate until 2024. After +0.3 percent in 2023, WIFO expects GDP growth of 1.4 percent in 2024. The upward pressure on prices will only subside slowly.

The results of the WIFO-Konjunkturtest (business cycle survey) in April point to an improvement in the total economy but reveal an uneven development of economic assessments in the individual sectors. Overall, the business activity indices point upward, with the trend being driven primarily by services and retail trade. In contrast, capacity utilisation slightly increased in all sectors. Similar to previous results, the "shortage of labour force" was the main obstacle to business activity in the Austrian economy in the last quarter, although the "insufficient demand" continued to gain in importance. Sales price expectations have been showing a downward trend for several months.

Austria's labour market defied the war in Ukraine, the energy crisis and high inflation in 2022. The upswing continued. Employment grew at its fastest pace in almost 50 years and the unemployment rate fell to its lowest level since 2008. The impact of the current slowdown on the labour market is expected to be weak in 2023. Reducing long-term unemployment, however, remains a key challenge. Despite the ongoing decline, it is still well above the level before the financial market and economic crisis of 2008-09.

Geopolitical changes and the energy crisis shaped the development of the global economy in 2022. Regionally, economic activity was heterogeneous, with rising uncertainty and supply shortages resulting in high price increases in many countries. Austria's economy continued to expand strongly in the first half of the year, but high inflation dampened consumer and investment demand as the year progressed. Consumer price inflation rose to a peak of 11 percent in the autumn of 2022, leading to, among other things, real wage losses for employees. The Austrian federal government implemented extensive temporary and permanent relief measures to cushion the social and economic impact of inflation and the energy crisis on companies and private households.