Austria in the crisis: Wifo boss demands brave reform plan!

Austria in the crisis: Wifo boss demands brave reform plan!

Austria is currently in the third year of a recession that has been considered the longest since World War II. The gross domestic product (GDP) has been shrinking since 2023, which heavily burdened the affected sectors. According to the director of the Austrian Institute for Economic Research (WIFO), Gabriel Felbermayr, the economic crisis is structurally and homemade and not cyclical. This can be seen from a current report by NÖN

The situation is further exacerbated by weak industrial services and consumption retention. Forecasts of the WIFO and the IH are 0.3 % or 0.2 % of a decline in GDP for 2023. The IHS boss Holger Bonin speaks of a national effort that should involve both employees and pensioners in order to combat this unprecedented crisis. Felbermayr warns a possible "lost decade" if substantial reforms are not immediately tackled.

urgent reform requirement

Felbermayr therefore calls for a "credible master plan" and a clear reform agent to give the Austrian economy new confidence. Above all, it must be brave about topics such as deregulation and the rapid expansion of renewable energies. The current challenges of the economy are not only due to external factors. Rather, they are also the result of homemade problems, which were reinforced by high government debts as a result of the Corona pandemic and the energy crisis, as Kleine Zeitung

In addition, high wage degrees have negatively influenced productivity through inflation, which has a negative impact on the country's competitiveness. In the meantime, Finance Minister Markus Marterbauer (SPÖ) rejects suggestions for reducing wage increases and pensions and refers to the need for the government program.

A look into the future

A slow recovery is planned for the coming years. It is not until 2026 that GDP growth will be expected again-1.2 % according to WIFO and 1.1 % according to IHS. However, the forecasts could be endangered by the ongoing uncertainty and the general economic situation. The budget deficit will be 3.3 % (WIFO) or 3.2 % (IHS) of economic output in 2023. The warnings of the two economic researchers are unmistakable: Without drastic cuts on site, Austria could stand without any significant growth before a decade that was really lost. At the same time, an increase in the unemployment rate is predicted to around 7.3 % to 7.5 % for 2023, followed by a slight recovery by 2026.

The inflation, which is expected to be 2.7 % (WIFO) and 2.9 % (IHS) in 2023, is another challenge that, in addition to the stress for everyday life, also puts the public sector under pressure. The government has put together a savings package of over 6.3 billion euros for 2023 to counteract the financial situation. In view of the upcoming publications of statistics Austria on the income and expenditure of the state, the urgency becomes clear for a fundamental, reform -oriented course in order to ensure the competitiveness and stability of the domestic economy.