The hoped-for upturn did not materialize: At the beginning of the second half of the year, the mood in the Austrian economy deteriorated. This is evident from the current economic indicator from Bank Austria. The prospect of an imminent recovery of the domestic economy has been pushed back significantly,” says Stefan Bruckbauer, chief economist at the bank.
The forecast for gross domestic product (GDP) was therefore lowered from 0.3 to 0.0 percent. “For the Austrian economy, only stagnation is in sight this year,” says Bruckbauer.
Growth of around 1.5 percent is expected for 2025. It is assumed that the global economy will recover due to the loosened monetary policy. This year, however, uncertainty is still dominated by geopolitical crises, high cost increases and the deterioration of the labor market.
“The assumption that the recovery in many service sectors, driven by the decline in inflation and the strong increases in real wages, can have a positive impact on the economy in industry and construction and thus trigger a noticeable recovery in the domestic economy, has not yet been fulfilled,” says Bruckbauer.
Image: Lukas Bezila
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Image: Lukas Bezila
On the contrary: the weakness in the production sector continues and is spreading to the service sector. This has been reflected in real sales declines in retail, for example. As the Bank Austria survey shows, at the beginning of the second half of the year, the mood in all domestic economic sectors was worse than in the eurozone as a whole.
The Austria-wide unemployment rate rose to 7.1 percent – the highest figure since September 2021. Industry and the construction sector accounted for a comparatively high share of this. Bank Austria is forecasting a slight easing for 2025: the unemployment rate is expected to fall to 6.9 percent.
In the first seven months of this year, inflation averaged 3.6 percent. The bank’s economists expect a further decline here, with the weak economy having a dampening effect. The inflation forecast for 2024 has been reduced from 3.6 to 3.3 percent. An average inflation rate of 2.3 percent is expected for the coming year.
