Economy will not recover until 2025 as inflation rate decreases by half

After the recession in 2023, the National Bank of Austria is forecasting a slight recovery in the domestic economy this year with growth expected to be 0.3 percent. The increase is mainly driven by private consumption. In its March forecast, the OeNB had initially assumed a growth rate of 0.5 percent for 2024. Inflation, calculated using the HICP method, is expected to significantly weaken this year to 3.4 percent from 7.7 percent last year.

The National Bank is concerned about the high wages in Austria, which are above the Eurozone average, posing a challenge for price competitiveness in exports. The need for budget consolidation for 2025 and 2026 is also a priority, with expectations of new debt exceeding three percent each year. Economic growth is projected to accelerate in the next two years, with growth rates of 1.8 percent in 2025 and 1.5 percent in 2026.

The labor market is expected to remain robust until 2026, with wage growth reaching its peak in early 2024 and gradually declining in line with inflation. The unemployment rate is forecasted to increase slightly this year before declining to 6.3 percent by 2026. Overall, the OeNB sees positive developments in the economy, with increased consumption, exports, investments, and construction industry growth anticipated in the coming years. Prices in industries such as catering and rents continue to contribute strongly to inflation in Austria.