Austria's economy in crisis: Saving or endangering growth?

Austria's economy in crisis: Saving or endangering growth?

Austria faces a serious economic challenge in 2025, as economic expert Gabriel Felbermayr explained in the Morning Journal. Drastic austerity policies may be necessary to meet financial needs. Up to 24 billion euros are to be saved in order to combat the impending budget deficit. Significant savings could be achieved by eliminating subsidies for climate protection, social spending and educational leave, with Felbermayr speaking of a total savings volume of four to five billion euros. Nevertheless, he warns: A savings package of six billion euros could push the already weak growth of 0.5 percent to a critical level and trigger a recession Vienna newspaper reported.

Economic uncertainties and forecasts

The situation has worsened in recent years, as Austria has been in an economic crisis for two years. According to the Austrian Institute for Economic Research (WIFO) and the Institute for Advanced Studies (IHS), the economy could have shrunk by 0.9 percent in 2024. The economic forecasts suggest only modest growth of 0.6 to 0.7 percent for 2025, even assuming that there are no drastic budget cuts. The discussions about budget consolidation are currently the central point of contention between the potential coalition partners OE24 reported.

Another uncertainty factor is the upcoming term of office of US President Donald Trump. His announced tariff increases for EU imports could place a significant burden on Austria's foreign trade, which is of great importance for the economy. But not everything is negative: while the industry remains under pressure, growth in trade is expected, bringing hope for consumers. According to forecasts, the inflation rate could stabilize around the target of two percent by 2026, but the economic situation remains tense and the emphasis on necessary reforms and measures remains high.