Recovery continues, but inflation comes back into focus
- Slight slowdown in recovery as a result of the Iran conflict
As a result of the Iran conflict, we have slightly lowered our growth forecast for the Austrian economy. We expect the tentative recovery of the domestic economy to slow down somewhat, but not to come to a standstill. We have lowered our GDP forecast by 0.1 percentage points to 0.9 percent for 2026 and 1.4 percent for 2027. - Unemployment rate unchanged at 7.5 percent
The slight improvement trend in the labor market stalled somewhat at the beginning of the year, but the situation remains stable. 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 smaller 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 in 2025. - Iran conflict will cause inflation to rise again
Inflation in the first two months of 2026 fell to an average of 2.1 percent year-on-year, 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. Inflation will rise again in the coming months due to the already increased energy prices. We have raised our inflation forecast from 1.9 percent on average in 2026 to 2.5 percent. - ECB on hold
Since the unfavorable impact on the economy is manageable if the war lasts for a limited period and the rise in inflation is also likely to remain within a relatively narrow and temporary framework, we assume that the ECB will retreat to a waiting position.
As of March 2026.
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