Austria Up-to-date Recovery remains moderate

graphic GDP, inflation, unemployment rate

  • More momentum in the second half of the year should still enable a slight increase in GDP in 2024
    The Austrian economy emerged from recession in the first quarter thanks to some tailwind for the service sector, but the pace of recovery was slow in view of the persistently weak demand in industry and construction. After an increase of 0.2 per cent on the previous quarter, the domestic economy is expected to grow at the same rate in the second quarter. We even expect slightly stronger growth rates for the second half of the year.
    Following the slight decline in GDP in the first half of the year by around half a per cent compared to the previous year, a slight economic growth of 0.3 per cent will still be possible in 2024 as a whole thanks to the recovery in consumption. For 2025, we expect GDP to increase by 1.5 per cent, also supported by investments.
  • Unemployment rises in 2024, slight easing in 2025
    After the labor market has proved to be very resilient to the economic cycle so far this year, the consequences of the ongoing economic weakness can now be seen in the rising number of jobseekers in many sectors. After 6.4 per cent on average in 2024, the seasonally adjusted unemployment rate was already 6.9 per cent in June 2024. The situation on the labor market is likely to deteriorate for the time being, mainly due to the weakness in industry and construction, and only stabilise towards the end of the year. We expect the unemployment rate to average 6.9 per cent in 2024. For 2025, we remain optimistic that a decline to 6.7 per cent will be made possible by the improved economy.
  • Inflation is hardly declining for the time being
    Inflation has fallen significantly since the beginning of the year and stood at 3.0 per cent in June. However, the disinflation process will almost come to a standstill in the second half of the year. Inflation is likely to fluctuate around 3 per cent until the end of the year. We continue to expect an annual average inflation rate of 3.6 per cent in 2024, although the prospect of a slightly lower figure has increased slightly. For 2025, we continue to expect inflation in Austria to fall to an average of 2.3 per cent.
  • Interest rate reduction cycle has begun
    In view of the sharp fall in inflation, the ECB made its first cut in key interest rates in June. Both overall and core inflation in the eurozone are unlikely to slow significantly in the coming months, which is why the ECB will probably not make its next interest rate cut until September.
    We expect the ECB to continue to cut interest rates at a pace of 25 basis points per quarter, i.e. in September and December. Given our expectation that inflation in the eurozone will fall to below 2 per cent in 2025, we anticipate a further easing of 100 basis points. The deposit rate should therefore be 2.25 per cent at the end of 2025.


Austria Up-to-date (PDF)

As of July 2024.

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.

Focus Austria
Slow recovery of the economy

  • GDP in Austria declines by 0.8% in 2023 - economy moves sideways in 1H 24
    The difficult global conditions and the consequences of high inflation led to a very subdued development of the Austrian economy in 2023, which even slipped into recession from spring to fall, resulting in a GDP decline of 0.8% for the year as a whole. There has only been a very modest im-provement since late fall 2023. However, the economic and sentiment in-dicators to date only suggest that the economy will largely move sideways in the first few months of 2024.
  • Recovery expected from mid-2024 - consumption and investment from 2025 will stimulate the economy
    The gradual improvement in general conditions should continue and ena-ble the Austrian economy to pick up from the middle of the year, primarily supported by consumption as a result of lower inflation. The turnaround in the inventory cycle should also provide support. However, due to the cau-tious start to the year, we only expect weak economic growth of 0.3% in 2024.
    In addition to the continued improvement in consumption in light of further real wage growth, the gradual recovery in investment should strengthen economic growth in Austria in the next year. With the tailwind from the less restrictive monetary policy, a stronger increase in GDP of up to 1.5% should be possible in 2025.
  • Unemployment rate rose to 6.4% in 2023 - slight upward trend to con-tinue at least until the end of 2024
    The weakening economy has now had a noticeable impact on the labor market, albeit with a slight delay. The annual average unemployment rate rose to 6.4% in 2023, compared to 6.3% in 2022. Due to the ongoing eco-nomic slump, the situation on the Austrian labor market deteriorated fur-ther in the first few months of 2024. We expect an average unemploy-ment rate of 6.8% for 2024. The situation is not expected to ease until around the turn of the year, which should make it possible to reduce the unemployment rate to 6.5% in 2025.
  • Fall in energy prices slows inflation in 2023 - expiring second-round effects support further decline in inflation  
    Following the sharp rise in inflation in 2022 to an annual average of 8.6%, price increases slowed in 2023 due to falling energy and commodity pric-es. After inflation of 11.2% at the start of the year, inflation fell to below 6% towards the end of the year. On average for the year, however, inflation fell relatively slightly compared to 2022 to 7.8% (EU method: 7.7%). For 2024, we expect an inflation rate of 3.6%. As the second-round effects continue to fade and energy prices are likely to have no disruptive effects, average inflation should fall to 2.3% in 2025. However, inflation will still be higher than in the eurozone.
  • Interest rate cuts expected from mid-2024 - Cautious easing of monetary policy in the eurozone should reduce deposit rate to 2.25% by the end of 2025 
    We expect the European Central Bank to start a cautious cycle of interest rate cuts towards the neutral rate from mid-2024. Key interest rates are likely to be cut by 75 basis points by the end of 2024 and by a further 100 basis points in 2025, meaning that the deposit rate should gradually fall from the current 4.00% to 2.25% by the end of 2025.
  • Budget deficit fell to 2.7 percent of GDP in 2023 - budget should also just meet the Maastricht criteria in 2024/25  
    The downward trend in deficits since the pandemic-related peak of 8% of GDP in 2020 continued in 2023, with the budget deficit falling to 2.7% of GDP. However, this was the first time since 2019 that the 3% Maastricht limit was adhered to again. We do not expect any noticeable improvement in the budget balance for 2024 and 2025 and anticipate a deficit of around 2.5% of GDP. In view of the extensive status quo in budgetary policy, general government debt will only fall from 77.8% of GDP in 2023 to just under 77% by the end of 2025.
  • Rise in interest rates dampened demand for credit, weak economy dampened deposit growth - headwinds are only slowly weakening In combination with higher interest rates, the weak economy led to a significant slowdown in credit growth in 2023. Despite the rise in interest rates, deposits also showed little dynamic growth. With financing conditions remaining less favorable than in previous years and only expected to improve from the second half of the year, demand for credit will remain subdued in 2024. Weak growth momentum is also expected for deposits in 2024. 

Focus Austria graphic

Focus Austria – Review and Outlook 2024/2025 (PDF)

As of April 2024.

About Focus Austria

"Focus Austria" - Review and outlook 2024/2025 offers a comprehensive analysis of the economic trends in Austria with special consideration of structural conditions. The publication provides an overview of the past year and offers an outlook on the developments expected in the current year and the following year. In addition to the current economic situation, the Austrian business location is assessed.

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