Economic forecast for 2025: ÖÖNB warns of difficult times and higher unemployment

Economic forecast for 2025: ÖÖNB warns of difficult times and higher unemployment

The Oesterreichische Nationalbank (OeNB) has presented its economic forecasts for the years 2025 to 2028. According to current estimates, the OeNB expects a slow economic recovery after two years of recession. Real economic growth of 0.6 percent is expected for 2025, followed by 0.8 percent in 2026 and 1.1 percent in 2027. However, OeNB Governor Martin Kocher points out that the economic environment remains challenging. Leadersnet reports that the export economy is under pressure. The weak German industrial economy, US tariffs and high wage and energy costs are putting a strain on the Austrian economy.

Another negative aspect is the forecast increase in the unemployment rate to 7.5 percent in 2025, with a decline only from 2027. The inflation rate also remains a central issue, as inflation of 3.6 percent is forecast for 2025, which is expected to fall to 2.1 percent by 2027. The declines in inflation are mainly driven by expiring energy price measures, falling raw material prices and increased euro value stability. The OeNB emphasizes, that the burden of inflation varies depending on the household structure, with lower income deciles being particularly affected.

Fiscal situation and public finances

The budget balance is estimated at minus 4.5 percent of gross domestic product (GDP) in 2025, with a slight improvement to minus 4.2 percent in the following two years. Nevertheless, the Fiscal Council warns of continued budget deficits above the Maastricht limit of three percent until 2027. The debt ratio will rise from 81.9 percent of GDP in 2025 to 86.8 percent by 2028. According to the Courier The introduction of EU-wide CO2 pricing in 2028 could lead to a further deterioration in the budget.

The construction industry, which traditionally represents a pillar of the Austrian economy, will only provide limited stimulus in the next few years. Housing investment has fallen since 2022. Private consumption is showing moderate growth despite overall weak economic development, but is being dampened by inflation and low wage agreements, which does not mean that any major stimulus for growth can be expected. The OeNB forecasts that the recovery in the industry will not begin before the end of 2025.

outlook

The economic report concludes that no stormy recovery is expected in 2026 and 2027, but growth is forecast to be slightly above the Eurozone average. The challenges facing the export industry, as well as geopolitical uncertainties, could further weigh on the economic situation. However, Wifo director Gabriel Felbermayr speaks of “a light at the end of the tunnel” and emphasizes that the long-term prospects of the Austrian economy could remain stable provided structural reforms and measures to revive competitiveness are implemented.