Domestic demand recovery should prevent third year of recession

  • Weak Austrian economy with slight improvement trend 
    Due to the more favorable framework conditions, supported by real wage growth and the easing of monetary policy, a slight upward trend should begin in the course of 2025. We expect real economic output to increase by 0.3% in 2025 and 1.3% in 2026. 
  • Unemployment rate is expected to average 7.3 % in 2025 and 2026 
    In January, the seasonally adjusted unemployment rate was 7.2%. The situation on the labor market is likely to deteriorate further for the time being and only stabilize with the improvement of the economy at the beginning of 2026. For 2025, we expect the unemployment rate to average 7.3%. We expect this level to stabilize in 2026. 
  • Budget deficit increased to around 4% of GDP in 2024 
    According to preliminary figures, the federal budget deficit rose to 3.9 % of GDP in 2024. This means that a significantly higher budget deficit than in 2023 can also be expected for the general government at 4 % of GDP. 
  • Inflation up at the beginning of 2025 as expected
    At the start of the year, inflation rose to 3.3 % year-on-year, fueled, among other things, by the abolition of the electricity price brake. After an average of 2.9% in 2024, we expect inflation in Austria to fall to an average of 2.5% in 2025 and to 1.9% in 2026.
  • Further rate cuts expected by the ECB
    As expected, the ECB has started 2025 with a further interest rate cut of 25 basis points. In view of the calming of inflation, we expect the easing of monetary policy in the euro area to continue. By the end of 2025, we expect key interest rates to be cut by a further 100 basis points, so that the deposit rate should reach its final level of 1.75 percent in the current interest rate cycle.

 

Austria Up-to-date (PDF)

As of February 2025.
 

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.

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