Austria's sinking economy: austerity measures or recession?

Austria's sinking economy: austerity measures or recession?

Austria faces challenging financial prospects: According to the WIFO economic research institute, the budget deficit will increase in 2025 to worrying 4.2 percent of gross domestic product (GDP). This development is largely due to increasing expenses in the areas of social benefits, pensions and the future fund for health, education and the environment. A drastic reduction in the deficit to the Maastricht maximum limit would dampen the already fragile economic growth by up to 1 percentage point, the experts warn. Budget consolidation of around 6 billion euros is necessary to reduce the deficit to 3 percent, which also contains the upcoming government negotiations, as was already discussed with Puls24.

economic recovery in danger

After the Austrian economy has declined in the past two years, minor growth of 0.6 to 0.7 percent is expected for 2025. However, these forecasts could prove to be too optimistic, since both WIFO and IHS emphasize the possibility of renewed recession due to inadequate austerity measures and structural problems. The pessimistic idea is reinforced by the fact that private consumption and exports have been declining for two years and the inflation rate has achieved high records of up to 8.6 percent in recent years.

for 2026 without significant savings, only an increase of 1.2 to 1.3 percent is predicted, while the unemployment rate of 6.4 percent in 2023 could increase to terrible 7.4 percent by 2025. The inflation will also remain in 2025 with an increase of 2.3 to 2.6 percent, especially due to increasing energy prices that are expected early in 2025 as soon as funding measures end. These signs strongly indicate that Austria's economic stability is seriously threatened, as can be seen from the current forecast of WiFo and IHS.