Recovery continues, inflation significantly lower
- Sustained economic recovery thanks to positive domestic demand and stabilisation of foreign trade
Economic growth is expected to be 0.5 percent in 2025. There are no signs of a significant change in the economic situation for 2026. However, the recovery should be able to increase in stability and momentum over the course of the year. We expect economic growth to accelerate slightly to 1.0 percent in 2026 and 1.5 percent in 2027. - Unemployment rate up slightly in January 2026
However, after the seasonally adjusted unemployment rate fell to 7.4 percent in December, it rose slightly again to 7.5 percent at the beginning of 2026. The more favourable economic development will drive the turnaround in the labour market in 2026, but setbacks such as those at the beginning of the year cannot be ruled out. After the unemployment rate rose to 7.4 percent in 2025, we expect it to fall to 7.3 percent in 2026 and continue to at least 7.2 percent in 2027. - Deficit of the 2025 federal budget lower than planned
At 2.8 percent, the federal government's net financing amount for the year as a whole remained well below the estimate of 3.5 percent of GDP. In view of this positive development, we expect the general government budget deficit to decline slightly to 4.0 percent of GDP, despite the challenges in the state and municipal budgets. - Sharp decline in inflation at the beginning of 2026
Inflation fell to only 2.0 percent in January, mainly due to the elimination of the effect of the expiry of the electricity price brake from the calculation, but also due to declining upward pressure from food and service prices. Due to the surprisingly strong decline, we have lowered our inflation forecast for 2026 to an average of 1.9 percent - ECB key interest rates expected to remain stable
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 February 2026.
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