Economic output is unlikely to collapse nearly as much in 2023 as in 2020. Nevertheless, the mood in the economy is bad. The IHS boss locates “almost too much drama”.
Measured by the economic slump in the first year of Corona, what the domestic economy is facing in the new year is more of a recession than a recession. Experts agree that the economy will hardly move from the spot, the forecasts for economic growth in 2023 oscillate between a wafer-thin plus and a narrow minus. In 2020, domestic economic output was (BIP) fell by more than six percent.
According to Klaus Neusser, head of the Institute for Advanced Studies (IHS), the mood in the economy is worse than the current situation justifies. At the moment it is not necessarily a question of a recession, but rather of stagnation, even if GDP will probably shrink “slightly” for two consecutive quarters at the end of the year and at the beginning of the coming year. There is “almost too much drama,” said Neusser on the Ö1 program “Saldo”.
Inflation remains elevated
Although he identified inflation as a problem. The economist expects inflation to remain elevated. In 2023 he expects inflation to be around five percent. A further decline is expected in 2024. But it is “questionable” whether that ECB-Target of two percent will be achieved in the medium term.
“Inflation is driven by energy prices and eats through all areas,” says Neusser. “It comes in the services, in the rents that are indexed, and you will also (further) feel it in food.”
However, no further increase in energy costs is to be expected. The price of petrol has recently been declining.
decline in producer prices
An assessment that deals with the on Friday from the Austrian Statistics published producer price statistics for November. The producer price index for the production sector of Statistics Austria shows a minus of 1.1 percent for November compared to the previous month and has thus fallen in a monthly comparison for the first time since May 2020.
In a year-on-year comparison, the plus was of course considerable. Compared to November 2021, producer prices rose by 15.4 percent. In October and September 2022, the annual rate of change was plus 18.5 and 22.1 percent, respectively. While energy prices continued to be the main drivers of the rise, they rose 39.7 percent year-on-year in November. But the momentum is weakening. In the previous months, the annual rates of change for energy were still plus 48.8 percent in October and plus 63.3 percent in September.
The slackening of the momentum speaks for a rather subdued course of the further inflation development, whereby the uncertainties are great, according to Statistics Austria General Director Tobias Thomas.
permanent loss of wealth
According to IHS boss Neusser, there is no question that the crises of recent years will not leave Austria’s economy unaffected. The economy is leveling off at a lower level, there has been a loss of prosperity that is leveling the long-term growth path downwards by three to four percent.
Due to the lack of an innovation boost, which is also not in sight, the loss of prosperity will not be able to be made up for so quickly. There is a lack of momentum in investments, mainly replacement investments are made. “In my view, too little is happening there.”
For the economist Monika Köppl-Turyna is less important how much the economy grows or shrinks in the coming year, but rather the question of where Austria’s economy will be in regarding five years. In an interview with the “Presse am Sonntag” on January 1st, the Eco-Austria director calls for reforms, especially those that strengthen the competitiveness of the domestic economy. Because this was already under pressure before the outbreak of the pandemic – expensive energy is only a “fire accelerator”.
((ag./luis))