In its latest interim forecast, the Austrian National Bank (OeNB) has drastically reduced its economic outlook for Austria. Due to altered growth expectations for the second half of the year, the OeNB has lowered its forecast for real Gross Domestic Product (GDP) growth in 2024 from +0.3 percent by one percentage point to -0.7 percent, and for 2025 from +1.8 percent by 0.8 percentage points to +1.0 percent.
At the end of June, WIFO and IHS had projected a stagnation (0.0 percent growth) for the domestic economy in 2024 or a minimal increase of 0.3 percent. In early September, Raiffeisen Research predicted a GDP decline of 0.5 percent for this year. The domestic economic output shrank by 0.7 percent in 2023. This points to two consecutive years of recession for the Austrian economy.
According to OeNB economists, the downward revision is due to a weaker historical GDP trend and the decline in the second quarter of 2024. Additionally, a now weaker assessment for GDP growth in the second half of 2024 contributes to the revision. According to the OeNB, from its peak in the second quarter of 2022 until the second quarter of 2024, its domestic economic output has shrunk by 2.1 percent. The main reasons for this are the industrial recession and pronounced consumer restraint. The industry is particularly suffering from the weakness of the international economy, with energy-intensive and construction-related sectors being the main contributors to the industrial recession.
Due to the weaker economic development, the OeNB has also raised its forecast for the unemployment rate in Austria by 0.4 percentage points to 7.1 percent for 2024 and by 1.0 percentage points to 7.5 percent for 2025.
Opposition parties and trade unions hold the turquoise-green federal government responsible for the shrinking economy in 2023 and 2024 and call for measures against the recession. SPÖ economic spokesman Christoph Matznetter urges immediate action to provide security to people and businesses. FPÖ economic spokesman Axel Kassegger has called for extending the “urgently needed” electricity price compensation for the energy-intensive industry. NEOS chairwoman Beate Meinl-Reisinger advocates an “honest budget review” to repair the budget and create room for sustainable relief, stating, “Austria has not come through the crises well.”
Due to the economic downturn, the trade union advocates for measures, including those in location and employment. ÖGB chief economist Helene Schuberth said they are ready to work together on solutions if their expertise is needed. The trade union-affiliated Momentum Institute recommends the government introduce a stimulus package after the National Council election at the end of September. The institute advocates for expanding public transport and energy networks, building “affordable housing,” and increasing skilled worker scholarships through employment services.
The OeNB economists did not revise their budget deficit estimate in the September interim forecast. In June, they had projected a state financing balance of -3.1 percent for 2024 and -3.3 percent for 2025. The updated WIFO/IHS economic forecast, expected at the beginning of October, will be closely watched. Given the recession in 2024 and the significantly lower growth in 2025, a higher budget deficit than previously forecasted is anticipated.
On a positive note, there is good inflation news: Compared to the June forecast, OeNB economists have lowered the expected inflation rate by 0.4 percentage points each to 2.9 percent for 2024 and 2.3 percent for 2025. The decrease is mainly due to weak economic development and falling producer-level costs.
