COVID-19 Pandemic Dampens the Economic Outlook. Medium-term Forecast 2021 to 2025

In the baseline scenario of the forecast, Austria is expected to see a decline in real GDP of almost 7 percent and employment by about 2 percent in 2020, and an increase in the unemployment rate to around 10 percent. Fiscal measures to cushion the recession and the loss of tax revenues will result in an increase in the public deficit at 9½ percent and in public debt to 84 percent of nominal GDP in 2020. A rebound effect (+4.4 percent) will be seen in 2021; in the following years the growth dynamics will gradually decrease (2025 +1.3 percent). Due to low investment activity and persistently high unemployment, trend growth will weaken to +1 percent p.a. In the baseline scenario, the unemployment rate would fall to its pre-crisis level (7½ percent) by the end of the forecast period. In a more pessimistic risk scenario, it is assumed that due to a second wave of infection in the fourth quarter of 2020 in Austria and in the European main trading partners, significantly more restrictive health policy measures up to (partial) lockdowns will be taken. Under this scenario, the Austrian economy would shrink by 9¼ percent in 2020, almost stagnate (+½ percent) at this low output level in 2021 and rebound in 2022 (+5 percent). The budget deficit would rise to 10.8 percent in 2020; by 2021 the public debt ratio would rise to 93¼ percent and the unemployment rate to 10¼ percent. By the end of the forecast period, the unemployment rate would fall to 8.1 percent.