About Austria Up-to-date
The information provided by Bank Austria in our publication “Austria Up-to-date” includes current economic forecasts and the most recent data for key indicators, in some cases in the form of charts. The key indicators are supplemented by regular comments, and their impact on the forecast is analysed in this report.
Middle east conflict weakens economy and increases inflation
- Slight GDP increase at the beginning of 2026
GDP increased by 0.2 percent in the first quarter compared to the previous quarter, according to Wifo estimates. However, with the start of the Iran war and the subsequent sharp rise in energy prices, sentiment indicators have been pointing noticeably downwards since March. We assume that the tentative recovery of the domestic economy will continue, but that geopolitical uncertainties will limit consumption development and the willingness to invest. We expect economic growth of 0.8 percent in 2026 and a slight improvement to 1.2 percent in 2027. - Unemployment rate rose to 7.6 percent in April
As a result of the slowdown in the economic recovery due to the effects of the Iran war, the expected improvement in the labor market will be postponed by a few months.
After the unemployment rate rose to 7.4 percent in 2025, we now expect an unemployment rate of 7.5 percent for 2026. Only in 2027, supported by demographic effects, should a stable downward trend prevail and allow the unemployment rate to fall to at least 7.4 percent. - Double budget planned for 2027/28
The governing parties have agreed on the cornerstones of a double budget for 2027/28, which is to be adopted in parliament as early as 10 July. By 2028, the deficit is to be reduced to 3 percent of GDP. The budget provides for an additional financing requirement of 5.1 billion euros. 2.5 billion euros are earmarked for budget consolidation. 2.6 billion are to flow into offensive measures, such as the reduction of non-wage labor costs by one percentage point. In our opinion, the budget calculation is at least very tight in order to achieve the desired goal, and there is no room for maneuver in the event of a weaker economy. - Iran conflict has caused inflation to rise
Due to the rise in energy prices due to the Middle East conflict, inflation rose to over 3 percent in March and April. Inflation will continue to be at least at this level in the coming months. For 2026, we expect average inflation of 3.0 percent and a decline to 2.6 percent in 2027. - Interest rate hike in June increasingly likely
We expect the ECB to raise interest rates by a total of 50 basis points in June and September. However, the risks are asymmetrically distributed, and the likelihood of stronger measures by the ECB is much higher in view of the development of the geopolitical situation.
As of May 2026.
These publications do not constitute investment advice, investment recommendations, marketing communications, or financial analysis. In particular, they are not an offer or solicitation to buy or sell securities and do not constitute a solicitation to make such an offer. They are intended solely as initial information and are no substitute for advice based on the individual circumstances and knowledge of the investor.
It is an analysis based on publicly available economic data. Despite careful research and the use of reliable sources, no responsibility can be taken for completeness, correctness, timeliness and accuracy.
Any investment in securities involves risks. The value of the investment and the income from it may fluctuate suddenly and substantially and therefore cannot be guaranteed. There is a possibility that the investor will not get back the full amount invested, particularly if the investment is held for only a short time. In some circumstances, a total loss is also possible.
Possible (return) payments from the product may not protect investors against inflation risk. There can be no assurance, therefore, that the purchasing power of the capital invested will not be affected by a general increase in the prices of consumer goods. Figures and information on performance refer to the past and past performance is not a reliable indicator of future results.
Only in the context of an investment advisory service can UniCredit Bank Austria AG take into account the personal circumstances of the customer (investment objectives, experience and knowledge, risk appetite, financial circumstances and financial loss tolerance) and carry out a product-specific suitability test.
We would like to point out that the tax treatment depends on the personal or company circumstances of the investor and that the information on tax advantages is provided on the basis of the current legal situation, which may be subject to future changes and for which no information can be given as to whether they will be continued.
