Austria as the only country with an economic decline – Diepresse.com

The EU Commission does not see any rosy prospects for Austria’s economy this year. According to the current forecast in 2025, GDP will shrink the third year in a row – specifically by 0.3 percent. Austria is the only country to which the EU predicts a decline in business this year. At 2.9 percent, inflation remains significantly above the EU average and the target value of two percent. The deficit will also significantly exceed the permissible value of 3.0 percent with 4.4 percent of economic output.

The current prediction of the EU for Austria is much worse than the autumn forecast in November in all essential indicators. At that time, the EU Commission still assumed economic growth of 1.0 percent and an inflation rate of 2.1 percent. The deficit should be 3.7 percent in 2025. After all, the prediction for the unemployment rate remained unchanged at 5.3 percent.

Austria also has the red lantern at the IMF

The EU Commission’s forecast thus draws the same picture that already IMF drawn around a month ago. The monetary fund also called only one industrial country that will have a recession this year – Austria. Like the EU Commission, the IMF expects the domestic economy to shrink by 0.3 percent this year.

This means that the international forecasts also largely correspond to the values ​​of the domestic institutes WIFO and IHS, for this year a minus of 0.3 (WIFO) or 0.2 (ihs) percent predict. It was particularly worrying in the latest domestic forecast that the economists did not rule out another year of recession for 2026 – even if this was rather unlikely.

Austria as early as 2024 the economic bottom

In the economic forecast of the EU Commission, Austria was already at the bottom of the EU in 2024 with an economic decline in 1.2 percent. The commission writes triggers declining investments and stagnating consumption. High energy prices and rapidly increasing production costs would have suffered the competitiveness of industry. That will also burden exports.

After all, the EU Commission again expects economic growth of 1.0 percent for 2026. Inflation should also be practically back to the target value of the EU with 2.1 percent. Nevertheless, growth below the average of the EU countries and inflation above remained. According to the forecast, the deficit of Austria will also be 4.2 percent in 2026 above the Maastricht limit and above the EU average of 3.4 percent.

In the current forecast, the growth outlook of the entire EU was corrected downwards-mainly due to a weaker world trade view and increased trade policy uncertainty, especially through the tariffs.

Customs duties as a burden on world trade

Worldwide growth outside the EU is now forecast for 2025 and 2026 with 3.2 percent each – a decline compared to the autumn forecast 2024 (3.6 percent). This downward correction affects the USA and China in particular. World trade is likely to weaken even more. The actual tariffs, which China and the USA at least temporarily agreed on May 12, were lower than expected, but are likely to continue to be a burden on the trading relationship.

Therefore, export growth of only 0.7 percent is expected for the EU this year. The weakening goods exports are partially compensated for by more resistant service exports, as these are less affected by trade stresses. In private consumption, a somewhat more robust growth is expected than in autumn: 1.5 percent. This is due to the positive development in 2024 and a still solid labor market, accompanied by significantly declining inflation pressure. However, high savings continue to have a dampening of consumption.

High debt rate for EU countries

The nominal wages, which rose by 5.3 percent in 2024, will develop slower in 2025 and 2026. However, real wages continue to rise, so that workers may fully regain the loss of purchasing power suffered by inflation. Inflation is also to fall on the goal of two percent expected by the ECB for the Euro area this year.

The EU countries’ average budget deficit will increase to 3.3 percent in 2025, in 2024 it was 3.2 percent. The debt rate of EU countries is likely to increase on average to 83.2 percent in 2025 and in 2026 to 84.5 percent of GDP-after four years relatively quick reduction. (red./apa)