The recession in Austria is persistent: This is what the economic research institute Wifo explained on Friday on the occasion of its autumn forecast, which will be presented this morning. Wifo is revising its forecast for economic growth in 2024 from 0.0 percent (as it was said at the end of June) to minus 0.6 percent.
The Institute for Advanced Studies (IHS) is now also assuming minus 0.6 percent. It had expected an increase of 0.3 percent at the end of June. The two institutes traditionally publish their respective forecasts together every quarter.
According to Wifo, the main reason for the ongoing recession is the shrinking investment in equipment (machinery, equipment, vehicles). Exports of goods to Germany fell significantly in the current year. Construction is weak, and so is consumption, although real incomes are rising.
After the record inflation years of 2022 and 2023 with 8.6 percent and 7.8 percent, inflation in this country is expected to be significantly lower this year at 3.1 (Wifo) and 3.0 percent (IHS), respectively.
Higher spending and weaker growth in tax revenues are causing the government budget deficit to continue to rise. In June, Wifo and IHS expected a budget balance in 2024 of -3.2 percent and -3.0 percent; in the autumn forecast, -3.7 percent and -3.5 percent are now expected. The deficit is therefore above the EU debt rules (Maastricht criteria) of 3 percent.
The weakening economy is causing unemployment to rise. Wifo and IHS assume an equally high increase. The unemployment rate is expected to increase from 6.4 percent in 2023 to 7.0 percent this year and 7.2 percent next year.
Wifo assumes that the economy will grow by one percent again in 2025, but foreign demand should pick up again, which is currently expected. Otherwise, a third year of recession could follow, according to Wifo.
