Financial Market Crisis Weighing on Economic Growth. Economic Outlook for 2008 and 2009

GDP in Austria is projected to grow by 2.1 percent in volume this year, markedly down from the pace observed in the last two years when growth almost reached 3½ percent respectively. Next year, the momentum may moderate further, to an annual increase of 1.7 percent. The forecast, particularly for 2009, is subject to an unusually wide margin of uncertainty, since scope and duration of the current international financial market crisis can not be reliably predicted. The credit crisis has already left a clear impact on the real economy in the USA, and neither the global economy at large nor the euro area will remain entirely unaffected. Also in Austria, exports, industrial output and investment are set to decelerate during 2008, having still been buoyant at the beginning of the year. Private consumption is unlikely to provide major support as high inflation (2008: +2.9 percent) will prevent net real income per employee from rising. Job creation, having been strong in early 2008, will gradually abate with economic activity slackening, and the downward trend in unemployment is likely to turn around in 2009.