Cyclical Upturn Set to Continue, With Risks Persisting. Economic Outlook for 2011 and 2012

The export-driven upswing of economic activity in Austria is expected to continue. Nevertheless, the pace of growth will decelerate markedly in the first half of 2011 as global trade and the expansion in Asia, Latin America and the USA lose momentum; in addition, the planned fiscal consolidation in the euro area and weak competitiveness of the southern European economies will weigh on aggregate demand. Whereas business activity should rebound worldwide in the latter part of 2011 and into 2012, it may remain subdued in the euro area. For Austria, WIFO expects real GDP to expand by 2.2 percent in 2011 and 2.0 percent in 2012. Main driver of demand and output growth are exports, stimulating notably manufacturing and, albeit gradually, business fixed investment. The cyclical revival will help correcting the imbalances on the labour market and in public finances. Yet, at barely below 7 percent of the dependent labour force, unemployment will remain high. The government deficit is likely to narrow to 3.1 percent and 2.7 percent of GDP in 2011 and 2012, respectively.