Headwinds Keep Austria's Economy Close to Stagnation in 2024


Economic Outlook for 2024 and 2025

The economic weakness in the EU is particularly affecting Germany and Austria, which are specialised in capital goods production. The high interest rates are weighing on investment demand as well as demand for construction services. Economic activity in both the euro area and Austria should pick up again around mid-2024 when the ECB is expected to ease its monetary policy. For the year as a whole, WIFO expects real GDP growth to remain weak at just 0.2 percent. It will accelerate to 1.8 percent in 2025.

"The upturn originally expected for the beginning of 2024 is being delayed. Surveys of domestic industrial companies showed a further deterioration in sentiment in February 2024", says Marcus Scheiblecker, one of the authors of the current WIFO Economic Outlook.

The high interest rates in the euro area are significantly dampening demand for capital goods. In the fourth quarter of 2023, investment in machinery and equipment as well as construction investment contracted (in real terms, compared to the previous quarter) in this economic area.

The economies of Germany and Austria, which are specialised in the production of machinery, are particularly suffering from this decline in demand. In both countries, where business sentiment is currently gloomy, economic growth in 2024 will again be weaker than the euro area average. For Austria, WIFO expects growth of just 0.2 percent.

The inflation rate in the euro area fell much faster and from a higher level than in the USA, reaching 2.8 percent in January and falling further to 2.6 percent in February, approaching rapidly the ECB's 2 percent target. This, as well as the weak business cycle, should allow the ECB to start easing monetary policy from mid-2024. Germany and Austria, in particular, should benefit from the subsequent revival in investment demand. As the economic situation improves, Austria's GDP should expand from mid-2024 and grow by 1.8 percent in 2025.

Inflation in Austria is expected to slow down further. After 7.8 percent in the previous year, it will fall to 3.8 percent this year and drop to 2.7 percent in 2025.

The labour market is reacting to the economic downturn with a delay. After the number of persons in active dependent employment rose by 1.2 percent in 2023 despite the recession, an increase of only 0.4 percent is expected in 2024. Based on the forecasted economic recovery, employment will post a stronger increase in 2025 (+1.1 percent). In turn, the unemployment rate should fall to 6.5 percent after a temporary increase to 6.7 percent in 2024 (2023: 6.4 percent; according to the national calculation method).

The weak business cycle, particularly in the energy-intensive industry, and the warmer-than-average February are contributing to a larger reduction in greenhouse gas emissions than calculated in the last WIFO Economic Outlook. A decrease of 2.5 percent is expected for 2024. In this forecast, WIFO predicts for the first time key figures on income distribution (see box "Beyond GDP: Indikatoren zur Einkommensverteilung", in WIFO-Konjunkturprognose 1/2024) and expects a slight increase in the relative risk of poverty from 2023 onwards, while distribution inequality will tend to decrease.


Gegenwind hält Österreichs Wirtschaft 2024 nahe an der Stagnation. Prognose für 2024 und 2025 (Headwinds Keep Austria's Economy Close to Stagnation in 2024. Economic Outlook for 2024 and 2025)
WIFO Economic Outlook (German version), 2024, (1), 35 pages
Online since: 22.03.2024 10:00
Die Konjunkturschwäche in der EU trifft vor allem die auf Investitionsgüter spezialisierten Länder Deutschland und Österreich. Die hohen Zinssätze belasten die Investitionsnachfrage ebenso wie die Nachfrage nach Bauleistungen. Um die Jahresmitte 2024 sollte die Wirtschaft sowohl im Euro-Raum als auch in Österreich wieder Fahrt aufnehmen, da die EZB ihre Geldpolitik lockern wird. Für das Gesamtjahr erwartet das WIFO ein weiterhin schwaches Wirtschaftswachstum von nur 0,2%. 2025 beschleunigt es sich auf 1,8%.
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Mag. Dr. Marcus Scheiblecker

Research groups: Macroeconomics and Public Finance
© WIFO / Johannes Brunnbauer
© WIFO / Johannes Brunnbauer