Budgetary and Labour Market Policies Facing Major Challenges Despite Faster Growth. Economic Outlook for 1999 to 2001

WIFO is upholding its projections for real GDP growth of 2.2 percent in 1999, unchanged since last March. In the first half of 1999, growth was driven almost entirely by domestic demand. Since mid-year, exports and industrial activity have picked up significantly. In 2000, the Austrian economy should benefit not only from an accelerating expansion of foreign markets, but also from sizeable gains in price-competitiveness. Yet, with the tax reform taking effect, also private consumption will receive additional stimulus. Real growth of GDP is projected to strengthen to 2.8 percent. A first outlook into 2001 suggests demand and output may continue rising at an above-average pace of 2¾ percent. Price stability is set to be maintained. The two key challenges for economic policy are public sector borrowing and unemployment: from today's perspective, developments on both indicators will fail to meet government targets.