Austria's economy in the doldrums: alarm forecasts by 2029!

Austria's economy in the doldrums: alarm forecasts by 2029!

Vienna, Österreich - Austria faces a challenging economic development, as the current forecast of the IHS (Institute for Higher Studies) shows. IHS boss Holger Bonin describes economic growth as "clearly too weak" by 2029. According to the Corona and High Inflation Years, the country is in a "consolidation phase", which significantly restricts growth. Real GDP growth is estimated for the period from 2025 to 2029 to an average of 0.9 % per year, which is below the forecast 1.3 % in the euro area. This situation complicates the economic improvement for the growing population and the stabilization of the state finances, reports [vienna.at] (https://www.vienna.at/ihs-set-maessige-wachstum potential-bis-2029/9556523).

For 2025, even minimal growth of 0.1 % is forecast. The growth should then rise slightly: 1 % (2026), 1.3 % (2027), 1.2 % (2028) and 1.1 % (2029). Bonin calls for a “productivity offensive” to strengthen competitiveness. A central problem remains the overall-state deficit, which is due to fall from 4.6 % of GDP in 2024 to 3.2 % by 2029, but still lies above the Maastricht debt rules of 3 %. A budget deficit of 4.4 % is expected for 2025.

economic challenges and reform needs

The current economic situation is difficult by a deteriorated competitiveness and a difficult international environment. US customs policy in particular has a negative impact on the Austrian economy. According to the IHS forecast, GDP Austria could be reduced by 0.2 % by these tariffs in 2025 and 0.1 % in 2026. In contrast, the IHS GDP loss for the United States estimates 0.5 % (2025) and 0.7 % (2026).

In addition, the decline in investments in Austria reflects increasing economic uncertainty. High energy and financing costs as well as increased wage costs contribute to the restraint of the entrepreneurs. Nevertheless, slow recovery in real gross investment and private consumption is expected in the coming years. The labor market shows some positive tendencies: the unemployment rate is expected to drop from 7.5 % in 2025 to 6.2 % by 2029

inflation and geopolitical risks

The inflation rates in Austria have risen significantly since 2022, were 8.6 % in 2022 and decreased to 7.8 % in 2023. For 2024 and the years 2025 to 2029, a stable inflation of 2.9 % is forecast. However, there is "considerable downward risks" for the economic forecast, especially due to geopolitical tensions and US economic policy. This could potentially endanger the stability of the Austrian economy.

The FPÖ and the industrial association are calling for political reforms to relieve taxes and duties as well as the revision of the trade regulations in order to strengthen the country's competitiveness. This necessary reform agenda should be promoted in particular in the areas of labor market, education, health and social issues.

The overall economic forecasts for Austria are published every six months and take into account current VGR and labor market data as well as international framework conditions. These forecasts are crucial for the monetary policy of the European Central Bank (ECB), and they flow into the overall economic projections of the EuroAum, as on the website of the Austrian National Bank.