End of recession, but no liberating blow
- GDP up 0.2 percent on the previous quarter at the beginning of the year
After a total of eight consecutive quarters of GDP decline, the downward trend was interrupted at the beginning of 2025. Despite the upward trend, the economic situation in Austria remains very challenging. We continue to expect GDP to decline by 0.2 percent in 2025. Expectations for 2026 remain low as a result of US tariff policy, but we still expect moderate economic growth of 1.1 percent. - Unemployment rate expected to rise to 7.5 percent in 2025
In view of the ongoing economic challenges, a further deterioration in the situation on the labor market is to be expected in the coming months. We assume an average unemployment rate of 7.5 percent for 2025. For 2026, we expect stabilization at this higher level. - Budget deficit will continue to exceed 4 percent of GDP in 2025
The announced austerity package of 6.4 billion euros or 1.3 percent of GDP for 2025 will only slightly reduce the budget deficit in 2025. According to the official budget estimate, we expect a budget deficit of 4.5 percent of GDP for 2025. - Energy prices supportInflation decline
In the first third of the year, inflation rose to an average of 3.1 percent. For the coming months, we expect inflation to slow gradually. We expect inflation to average 2.5 percent in 2025 and decline to 1.9 percent in 2026. - Further interest rate cuts expected by the ECB
At its April meeting, the ECB decided to cut key interest rates further by 25 basis points, as the burden of higher US tariffs outweighs the positive growth impulses from a more expansionary fiscal policy in Germany and at the EU level. We therefore expect further cuts in June and September, with the deposit rate peaking at 1.75%.
As of May 2025.
About Austria Up-to-date
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