Third consecutive GDP decline due to US tariff policy now likely
- End of recession, but weak growth remains
The current data indicate that the recession in Austria is likely to have ended in the first quarter, but the expectation of a further gradual improvement in the economy in the coming months is unlikely to be fulfilled for the time being. In view of the burdens of the protectionist measures of the USA on the domestic export industry, we have lowered our GDP forecast for 2025 from +0.1 to -0.2 percent. - Unemployment rate expected to rise to 7.5 percent in 2025
In view of the ongoing economic challenges, a further deterioration of the situation on the labour market is to be expected in the coming months. We have raised our forecast for the unemployment rate for 2025 from 7.3 to 7.5 percent and expect it to stabilize at this higher level in 2026. - Budget deficit will exceed 3 percent of GDP in 2025
In order to reduce the budget deficit in 2025 below the Maastricht limit of 3 percent of GDP, an austerity package of 6.4 billion euros or 1.3 percent of GDP was put together for 2025. However, the scope of this package of measures will not be sufficient in view of the weak economy and the poor requirements from 2024. We now expect a budget deficit of at least 3.6% of GDP. - Energy prices support inflation decline
After inflation rose to over 3 percent at the beginning of the year, mainly due to the abolition of the electricity price brake, inflation has already slowed down again in March to an estimated 2.9 percent year-on-year. We continue to expect inflation to average 2.5 percent in 2025 and a decline to 1.9 percent in 2026. - Further interest rate cuts expected by the ECB
A decision to cut key interest rates by a further 25 basis points by the ECB at its April meeting has become very likely. In addition, we expect further cuts in June and September, with the deposit rate peaking at 1.75 percent.
As of April 2025.
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