Austria on the abyss: third year of the recession threatens!

Austria on the abyss: third year of the recession threatens!

Österreich, Land - Austria is faced with a challenging economic situation, which is characterized by a persistent recession. According to the current economic forecast by WIFO and IHS, the country is now in the third year of the recession. WiFo boss Gabriel Felbermayr emphasizes in a report on Leadersnet that is therefore largely homemade and therefore demands sustainable solutions are.

The forecasts are dark: for 2025, a decline in gross domestic product (GDP) is expected by 0.3 % of WIFO and 0.2 % from IHS. Other forecasts show that the budget deficit for 2025 will increase to 3.3 % of GDP and even 3.5 % for 2026. Such deficits could lead to an EU deficit procedure, which would increase the pressure on national financial policy.

a worrying picture of the economy

exports have dropped by 5 %, which is particularly questionable in view of an increasing world trade. The industrial association classifies this development as an alarm sign. The US tax increases on EU export goods and the decline in industrial production in the euro area also burden the mood in the economy. However, surveys among industrial companies show no signs of a trend reversal. The demand for construction and consumption, on the other hand, tends to show a positive development, which represents small bright spots in the otherwise cloudy economic landscape.

The inflation rate will increase initially, but a decline is forecast in the further course of 2025. The situation remains relatively robust on the labor market, but an increase in unemployment for 2025 is expected. The ECB indicates in its forecasts 6.7 % could increase.

prosperity and reform requirement

Felbermayr warns that wage increases and economic services drift apart and soon a “rendezvous with reality” is imminent. In order to stop the economic descent, courageous structural reforms are necessary, IHS director Holger Bonin demands. So far, government measures alone have largely obscured the effects of the crisis. Therefore, savings of 6.3 billion euros are planned by 2026, but it remains unclear whether this is sufficient to comply with the Maastricht limit of 3 % of GDP.

Hope for a recovery of the economy from mid -2025 remains, but it depends heavily on international framework conditions. According to the forecasts of the ECB, gradual growth in 2024 and a return to a moderate economic growth of 1.5 % in 2025 is expected. The price dynamics should decrease what the available income of the population could increase and thus benefit private consumption demand.