Economic growth in Austria is set to decelerate from 3.3 percent in 2000 to 1.7 percent this year, and may pick up to slightly above 2 percent in 2002. The slowdown is mainly due to weaker activity in Europe which itself is the consequence of the abrupt cyclical slackening in the USA and of higher energy costs. A further deterioration of business conditions in Europe may not be excluded, given the hesitant reaction of economic policy. Domestic demand in Austria should prove relatively robust, although construction activity is showing clear signs of weakness. The projection for inflation has been revised substantially upwards, both for this year and next (2.6 and 1.9 percent, respectively). The decline in unemployment is coming to a halt.