Domestic demand recovery should prevent third year of recession
- False start to 2025
At the beginning of 2025, the Austrian economy was unable to overcome the economic weakness, which was ultimately reflected in a decline in GDP of 1.2 percent in the previous year. The few hard economic data available so far show a continuation of the recession in domestic industry for the first few months. - Unemployment rate expected to rise to 7.3 percent in 2025
In February, the seasonally adjusted unemployment rate was 7.3%. The situation on the labour market is likely to deteriorate further for the time being and not stabilise until the beginning of 2026. For 2025, we expect the unemployment rate to rise to 7.3%. We expect this level to stabilize in 2026. - Budget deficit increased to around 4 percent of GDP in 2024
According to preliminary figures, the federal budget deficit rose to 3.9 percent of GDP in 2024. This means that a significantly higher budget outflow than in 2023 can also be expected for the general government at 4 percent of GDP. - Inflation increased at the beginning of 2025 as expected
In January and February, inflation rose to 3.2%, fuelled, 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 after the surprisingly strong increase in inflation at the beginning of the year. For 2026, we continue to expect 1.9 percent. - Further interest rate cuts expected by the ECB
As expected, the ECB lowered key interest rates by a further 25 basis points in March. Since the summer of 2024, the deposit interest rate has been reduced by a total of 150 basis points to now only 2.50 percent. We currently expect two rate hikes by the end of the year with a reduction in the deposit rate to 2.00 percent.
As of March 2025.
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