The rating is supported by a diversified and prosperous economy as well as strong political and social institutions. However, this is offset by high public debt compared to other countries with a similar rating, writes Fitch.
Vienna. The agency expects weaker growth and higher spending this year due to the extension of the electricity price cap and the suspension of CO2 taxes until the end of 2024. Analysts see growth of 0.4 percent for 2024. The main driver is private consumption, which is supported by real wage growth and a robust labor market. However, wage growth might put a strain on the country’s international competitiveness.
Fitch rates the banking system as largely resilient. Russian banking assets are concentrated primarily in a few larger Austrian banks, and the risk for the sector as a whole appears manageable. Relatively low household debt also reduces risks that might arise from falling real estate prices.
Despite higher spending and less growth, Austria should be able to achieve its planned deficit of 2.9 percent of GDP for this year. Compared to other countries with an AA rating, however, the level of debt is rather high. In the next two years, however, the deficit in Austria should be reduced somewhat by austerity measures and a renewed increase in economic growth. Fitch expects a deficit of 2.7 percent of GDP in 2025 and 2.5 percent in 2026. Even following the national elections in September, Fitch largely expects continuity in fiscal issues.
