Economic Recovery Delayed until 2025 as Inflation Rate Halves

Since the recession in 2023, the National Bank of Austria has projected a slight recovery in the domestic economy this year, with a forecasted growth of 0.3 percent. This growth is primarily attributed to private consumption. Despite high wage growth, inflation has not decreased significantly, with services contributing minimally to the decline. In particular, prices in the catering industry and rents continue to drive inflation in Austria.

In March, the OeNB had predicted a growth rate of 0.5 percent for 2024, but this has been revised due to concerns about high wages impacting price competitiveness in exports. Additionally, there is a need for budget consolidation in the upcoming years, with projections showing new debts exceeding three percent annually until 2026. The labor market is projected to remain robust until 2026, with wage growth expected to decrease in line with inflation and a slight increase in the unemployment rate for this year from 6.4 to 6.7 percent followed by a decline to 6.3 percent by 2026.

The OeNB anticipates that the peak of this economic cycle will be in 2025, with an increase in consumption growth, exports, and investments due to more favorable financing conditions and government-approved construction packages. Despite these challenges, economic growth is expected to accelerate in the following years, reaching 1.8 percent in 2025 and 1.5 percent in 2026

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