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.
Economic dip over the summer and higher inflation
- Slight economic dip due to Middle East conflict
We expect stagnation in the second quarter, weighed down by the impact of geopolitical uncertainties on consumption and investment. However, the tentative recovery of the domestic economy should continue as the Middle East conflict calms down. We continue to expect GDP growth of 0.8 percent in 2026 and a slight improvement to 1.2 percent in 2027. - Unemployment rate rises to 7.6 percent
The unemployment rate rose to 7.6 percent seasonally adjusted in April and remained there in May. As a result of the slowdown in the economic recovery due to the effects of the Iran war, the expected improvement in the labor market will be postponed by a few months. After the unemployment rate rose to 7.4 percent in 2025, we now expect an unemployment rate of 7.5 percent for 2026. Only in 2027, supported by demographic effects, should a stable downward trend prevail and allow the unemployment rate to fall to at least 7.4 percent. - Double budget planned for 2027/28
The general government deficit fell to 21.5 billion euros or 4.2 percent of GDP in 2025, remaining below the originally planned figure of 4.5 percent of GDP. The governing parties have agreed on the cornerstones of a double budget for 2027/28, which provides for a deficit of 3.5 percent of GDP in 2027 and 3 percent of GDP in 2028. In our opinion, the calculation is at least very tight in order to achieve the desired goal. There is no room for manoeuvre in the event of a weaker economy, so we have raised our forecast for the budget deficit to 3.8 percent for 2027, following a deficit of 4 percent in 2026. - After fuel prices, service prices are now rising
Due to the rise in energy prices, inflation rose significantly from March onwards and is expected to reach as much as 3.7 percent in May, burdened by initial knock-on effects on service prices. Inflation will continue to be at least at this level in the coming months. We have therefore raised our inflation forecast for 2026 from 3.0 to 3.4 percent and continue to expect a decline to 2.6 percent in 2027. - Key interest rates raised by 25 basis points in June
After the ECB's expected interest rate hikes of 25 basis points in June, we believe that the ECB will wait with further steps for the time being. However, we expect the ECB to deliver another 25 basis point rate hike in September.
As of June 2026.
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