2023-06-16 08:12:57
The Oesterreichische Nationalbank (OeNB) expects the economy to pick up in the second half of the year and thus slight economic growth for the year as a whole. Despite the decline, inflation will still be 7.4 percent. Real incomes in Austria should increase slightly this year, unemployment will remain stable. According to the forecast, inflation should fall to 4.1 percent in 2024, the economy should grow by 1.6 percent and real incomes should rise sharply by 3.3 percent.
According to the OeNB, the economy has been in a stagflation phase since the second half of 2022, i.e. zero growth with high inflation. “But in the second half of the year, the economy will pick up momentum once more and inflation will slowly fall,” says OeNB governor Robert Holzmann. There is no risk of a recession in Austria for 2023 as a whole, i.e. a contraction of the economy, the OeNB expects an increase of 0.5 percent. However, measured once morest the EU-wide comparable HICP, prices will increase by 7.4 percent. Nevertheless, employees in Austria can expect slight growth in their real income of 0.3 percent. The unemployment rate rose only minimally to 6.4 percent.
Since the collective bargaining negotiations in Austria bring the inflation of the previous year into the wage increases, the falling inflation in 2024 will lead to an “extraordinarily strong increase in real wages and thus in private consumption”, according to the forecast. Austrians can hope for a real 3.3 percent increase in income. Although inflation will fall to 4.1 percent in 2024, inflation in the service sector will only fall slowly. Therefore, core inflation (excluding energy and food) will be 5.1 percent in 2024, 1 percentage point above the HICP rate. Economic growth should rise to 1.7 percent and unemployment should fall once more slightly.
For 2025, the OeNB expects further economic growth of 1.6 percent. Inflation should fall to 2.9 percent, but that would still be above the traditional ECB target of 2 percent and well above the long-term average. Real income should once once more increase strongly by 2.4 percent. The basic labor shortage continues, the unemployment rate should be just over 6 percent.
In terms of public finances, the OeNB assumes that Austria’s new debt (deficit) will fall thanks to the expiry of the corona measures, but following 2.6 percent of GDP this year, it will still be 1.9 percent in the years to come. The debt ratio, measured as debt as a share of economic output, “will fall from 78.4 percent in 2022 to 70.9 percent in 2025, primarily due to the inflation-related high growth in nominal GDP,” says the OeNB forecast.
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