UniCredit Bank Austria Economics Provincial Analysis 2025 and Outlook 2026:
Tentative stabilisation following recession – regional disparities remain high
- Provinces showed mixed performance in 2025, with Tyrol and Vienna recording the strongest growth; service-oriented regions had the advantage
- Industry showed initial positive signs, construction sector remained a drag
- Public sector, real estate and retail as key growth drivers
- Tourism saw rising overnight stays, but value added remained subdued due to costs
- Unemployment has risen further in all federal states
- Moderate recovery expected to continue in 2026, with Carinthia, Vienna and Tyrol forecast to see the highest growth, whilst regional disparities persist
The economic situation in Austria in 2025 remained characterised by a challenging economic environment, but showed initial signs of stabilisation. “After two weak years, the economy was in a phase of stabilisation in 2025. Industry in particular, but also trade, provided the first positive impetus again, even if the overall momentum remained low,” analyses UniCredit Bank Austria Chief Economist Stefan Bruckbauer.
Tyrol and Vienna were the fastest-growing provinces, while industrial provinces remained subdued
With real growth of around 1.9 per cent, Tyrol emerged as the fastest-growing province in 2025. However, this was driven less by tourism and more by the comparatively stable industrial economy and a construction sector that was more robust than in other provinces.
Vienna followed with growth of 1.1 per cent. Behind it were Styria with 0.6 per cent and Vorarlberg with 0.5 per cent. Salzburg and Lower Austria, each at 0.4 per cent, and Burgenland at 0.3 per cent showed moderate expansion. Upper Austria stagnated at -0.2 per cent, whilst Carinthia recorded the weakest result at around -0.9 per cent.
“The differences between the federal states remained marked. Regions with a stable industrial sector and comparatively robust construction activity were able to expand more strongly in 2025. At the same time, growth momentum remained limited in many industrial federal states despite initial signs of recovery,” said Robert Schwarz, an economist at UniCredit Bank Austria.
Industry slightly up, construction sector remained under pressure
In 2025, industry showed a slightly positive trend for the first time in two years. In several federal states, industrial value added increased moderately, with technology-intensive sectors such as the pharmaceutical industry and electronics having a stabilising effect in particular. Nevertheless, momentum remained subdued overall and heavily dependent on international demand.
The construction sector, by contrast, remained in a pronounced slump. “Subdued demand in residential construction due to high building costs and higher financing costs continued to weigh heavily on the construction sector in 2025,” says Schwarz.
Services sector shows mixed performance
The services sector showed mixed performance in 2025, but remained the mainstay of economic development in the regions overall. Public administration, healthcare, financial services and the property sector made a positive contribution to value added in most federal states.
Business-related services, on the other hand, continued to perform weakly and suffered from low investment activity and a sluggish industrial economy.
Following the declines of previous years, the retail sector returned to positive growth, benefiting from a slight stabilisation in consumer demand.
In tourism, there was an increase in overnight stays, particularly in Tyrol, Salzburg and Vienna. Although demand in the Austrian tourism sector remained at a high level and the number of overnight stays continued to rise, growth in real value added was comparatively weak due to higher costs. As a result, tourism did not make a positive contribution to economic growth in most federal states.
Unemployment rate rose for the second year running in all federal states
Unemployment rates continued to rise in all federal states in 2025. The increase was particularly sharp in industrial regions, whilst tourism- and service-oriented federal states showed a comparatively more stable trend. Overall, the labour market remained tight, as economic stabilisation was not yet sufficient to bring about a sustained easing of the situation.
Moderate outlook for 2026
The economic outlook for the federal states is set to improve slightly in 2026. Following weak growth in 2025, growth of 0.8 per cent is expected in Austria in 2026, although this is likely to vary significantly from region to region. Industry is expected to continue its recovery gradually and contribute positively to growth once again. The services sector will remain the main pillar of economic development.
Carinthia, Vienna and Tyrol with the highest growth forecast for 2026
Service and tourism-oriented federal states such as Tyrol and Vienna are likely to continue to play a stable role and underpin economic development as a whole, with the pharmaceutical-related industrial sector in particular forming a consistently strong foundation in both regions. The growth forecast for Vienna and Tyrol stands at 1 per cent each.
“We expect Upper Austria and, above all, Carinthia in particular to catch up significantly in 2026,” said Schwarz. In Carinthia, with the highest forecast of 1.4 per cent, this growth will be driven largely by investment in the field of artificial intelligence. According to an analysis by economists at UniCredit Bank Austria, all federal states should be able to achieve positive economic growth by 2026.
Only a gradual stabilisation is expected on the labour market as well. Unemployment is likely to stabilise in the federal states over the course of the year, but a significant decline is not expected for the time being. Only in Upper Austria and Carinthia is there expected to be a slight decline in the average unemployment rate for the whole of 2026. Following the rise in the unemployment rate to 7.4 per cent in 2025, we anticipate an unemployment rate of 7.5 per cent in Austria for 2026.
Economic development continues to be influenced by geopolitical risks. Persistent uncertainties surrounding US tariff policy, as well as geopolitical tensions in the Middle East, could dampen international demand. Export-oriented federal states, in particular, remain vulnerable to external shocks.
“We expect the modest recovery to continue in 2026. The differences between the federal states will remain pronounced due to their varying economic structures,” Bruckbauer concluded.
Enquiries:
UniCredit Bank Austria Economics & Market Analysis Austria
Robert Schwarz, Phone: +43 (0) 50505-41974;
Email: robert.schwarz@unicreditgroup.at