Following an increase by 3.1 percent in 2007, economic growth in Austria will significantly lose momentum this year and next. While demand and output still proved robust in the first half of 2008, GDP for the year as a whole will expand by a more modest 2 percent in volume. In 2009, the annual rate of growth will fall further, below the mark of 1 percent, although a recovery should take hold as from the middle of the year. The global business cycle downturn, high energy prices and unfavourable exchange rate shifts exert a drag on domestic activity. While inflation is gradually receding, the positive trend on the labour market will turn around.