Weaker demand stimulus from abroad and fiscal retrenchment to lower government deficits will dampen economic activity in Austria in 1996 and 1997. Projected GDP growth of 1.6 and 1.2 percent, respectively, falls clearly below the medium-term trend. Employment opportunities are diminishing, not only in manufacturing but also in service branches. The current account deficit, however, is set to fall from its 1995 peak and inflation will further abate.