In 1997 and 1998, the most important impulse for the Austrian economy will come from merchandise foreign trade. Exports are likely to benefit from the recovery of the European economies and the strength of the dollar, and will expand by 7 percent in 1997 and by 8 percent in 1998. Manufacturing output as well as investment in machinery and equipment will pick up markedly. In 1997, economic growth will accelerate to 1.6 percent in real terms. 1998 will see a recovery of domestic demand, and real GDP is expected to grow by 2 percent. The current account continues to record a serious disequilibrium. The current account deficit will rise to 2 percent of GDP as a result of soaring merchandise imports, high expenditures by Austrian tourists abroad, and high net transfers to the EU. The economic recovery in Austria has not yet been strong enough to ease the strains in the labor market. In 1998, the unemployment rate will decline only slightly, to 6.9 percent according to the traditional Austrian method, and to 4.3 percent according to Eurostat. Inflation pressures remain low; the rate of inflation is expected to be 1.4 percent in 1997 and 1.6 percent in 1998.