Read our latest presentation on the economic outlook for 2025/2026.
Domestic demand gives hope for moderate recovery in 2025/26
- Weak Austrian economy with slight improvement trend
The weakness of the manufacturing industry in Austria continues and has spread to various service sectors. After the slight increase of 0.2% compared to the previous quarter at the beginning of the year, GDP stagnated in 2Q24. At the beginning of autumn, although sentiment in all sectors of the economy remains in pessimistic territory, there are first signs that the decline in inflation is beginning to support consumption. According to preliminary figures, however, Austrian economic output fell by 0.1% in 3Q24. However, a slight upward trend is expected due to the more favorable framework conditions, supported by real wage growth and the easing of monetary policy. After the renewed decline in GDP of at least 0.5% in 2024, we expect real economic output to increase by 0.9% in 2025 and 1.3% in 2026.
- Unemployment rate rises to 7.2% in 2025, slight decline in 2026
Due to the weak economic development, especially in industry and construction, unemployment continues to rise. In November, the seasonally adjusted unemployment rate was 7.2%. On an annual average, we expect an unemployment rate of 7.0% in 2024. The situation on the labor market is likely to deteriorate further for the time being and only stabilise with the improvement of the economy in the course of 2025. For 2025, we expect the unemployment rate to rise further to 7.2%. For 2026, we expect a decline to 7.0 percent, as the labor supply is expected to increase only slowly for demographic reasons.
- Inflation back below 2% yoy
Inflation has fallen significantly since the beginning of the year, falling below 2% for the third consecutive month at 1.9% in November. After the turn of the year, inflation is expected to rise towards 2.5%, partly due to 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 2.2% in 2025 and to 1.9% in 2026.
- Interest rate cut cycle has accelerated
The weak economic outlook and lower inflation expectations have increased pressure on the ECB to continue with interest rate cuts faster than planned. As a result, the deposit rate was cut again by 25 basis points in October, bringing the total to 75 basis points since June. For December, we expect the ECB to lower interest rates by another 25 basis points. Due to the unfavourable economic outlook and the imminent economic policy changes in the USA, the ECB could be forced to lower key interest rates below the neutral level of around two percent – i.e. to adopt a slightly expansionary monetary policy course. We expect a deposit rate of 1.75% from the end of 2025.
As of December 2024.
About Austria Up-to-date
The information provided by Bank Austria in our publication “Austria Up-to-date” includes current economic forecasts and the most recent data for key indicators, in some cases in the form of charts. The key indicators are supplemented by regular comments, and their impact on the forecast is analysed in this report.
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It is an analysis based on publicly available economic data. Despite careful research and the use of reliable sources, no responsibility can be taken for completeness, correctness, timeliness and accuracy.
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