Economic Growth Dampened by Oil Price Hike, but Exceeding the Euro Area Average. Economic Outlook for 2005 and 2006

  • Markus Marterbauer

GDP growth will reach only 1.7 percent this year and is expected to move but to a marginally higher rate in 2006. The high energy prices are eating into real disposable income of private households and thereby into consumer demand. Latest survey results show an improvement in industrial confidence which may lead to a recovery in machinery and equipment investment from its low level. Higher public spending on infrastructure, research and the upgrading of qualifications of the labour force has led to a positive growth differential vis-à-vis the euro area, while at the same time widening the budget deficit somewhat further.