Moderate recovery
- Sustained economic recovery thanks to positive domestic demand and stabilisation of foreign trade
We have increased our GDP estimate for 2025 from 0.3 to 0.5 percent due to a data revision and continued good sentiment and economic data. After a moderate start to the year, the economy in Austria should be able to pick up speed in the future. We expect economic growth to accelerate slightly to 1.0 percent in 2026 and 1.5 percent in 2027. - Unemployment rate at the end of 2025 down for the first time in three years
The improvement in the Austrian economy in the second half of the year has a positive effect on the labour market. The seasonally adjusted unemployment rate fell to 7.4 percent in December. After the unemployment rate rose to 7.4 percent on average in 2025, we expect it to fall to 7.3 percent in 2026 and continue to at least 7.2 percent in 2027. - Budget deficit will remain above 4 percent of GDP in 2026
For 2025, we expect a marginal decline in the budget deficit to 4.5 percent of GDP, after 4.7 percent in 2024. The consolidation measures already in place will have a stronger effect in 2026, so that the budget deficit is expected to fall further to 4.2 percent of GDP. The deficit is not expected to be less than 4 percent of GDP until 2027. - Sharp decline in inflation at the beginning of 2026
On an annual average, inflation rose to 3.5 percent in 2025 after 2.9 percent in the previous year. For 2026, we expect inflation to fall to an average of 2.4 percent, mainly due to the elimination of the effect of the expiry of the electricity price brake from the calculation. - End of the euro area rate cut cycle?
We expect the ECB to keep the deposit rate at 2 percent for an extended period of time. A progressive strengthening of economic momentum could trigger a 25 basis point rate hike towards the end of 2027.
As of January 2026.
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.
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