Austria’s Economic Recovery: Positive Signs on the Horizon Despite Challenges

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. However, due to high wages that are above the Eurozone average, posing a challenge for price competitiveness in exports, inflation, calculated using the HICP method, is expected to significantly weaken this year to 3.4 percent from 7.7 percent last year.

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.

The National Bank of Austria is concerned about the high wages in Austria and has highlighted it as a priority issue that needs urgent attention. Wages are currently above average levels in the Eurozone and pose a challenge for price competitiveness in exports. To address this issue and ensure budget consolidation for future years, new debt exceeding three percent each year is projected for both 2025 and 2026.

Despite these challenges, there are some positive signs on the horizon for Austria’s economy. Economic growth is projected to accelerate over the next two years, with growth rates of 1.8 percent in 2025 and 1.5 percent in