Slight improvement in sentiment at the beginning of the second half of 2025
- Chance of small GDP growth in 2025 In the first half of 2025, GDP fell 0.2 percent below the previous year's figure. The current UniCredit Bank Austria Business Indicator suggests that the domestic economy will receive some tailwind in the coming months. However, the trees will not grow into the sky. We expect only a slight increase of 0.1 percent in 2025 as a whole.
Under the more favorable conditions for domestic demand, economic growth of 1.1 percent is possible for 2026. - Unemployment rate expected to rise to 7.5 percent in 2025In view of the ongoing economic challenges, a further deterioration in the situation on the labour market is to be expected in the coming months. We assume an average unemployment rate of 7.5 percent for 2025. For 2026, we continue to expect stabilization at this higher level.
- Budget deficit will continue to exceed 4 percent of GDP in 2025The 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.
- Slight decline in inflation in 2H 2025 expectedIn the first seven months of 2025, inflation rose to an average of 3.2 percent. For the coming months, we expect inflation to slow gradually. Due to the increase in the first half of the year and an expected very modest decline in the coming months, we now expect inflation of at least 2.9 percent for 2025. We expect a decline to 2.1 percent in 2026.
- Further ECB rate cut becomes less likely The data on the impact of the US tariff agreement may not yet be sufficient for the interest rate decision in September, so ECB Governing Council members are likely to be very divided on the need for further monetary easing. In recent weeks, it has become more likely that the ECB will extend the interest rate pause in September. The deposit interest rate is thus expected to be frozen at 2 percent for the time being.
As of August 2025.
About Austria Up-to-date
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