Update of the Medium-term Forecast of the Austrian Economy 2021 to 2025

The Austrian economy is expected to recover significantly in 2022 and 2023 in the aftermath of the COVID-19 pandemic. Subsequently, it is expected to grow moderately until 2025. The recovery will be driven by the rebound of the global economy, supported by comprehensive fiscal policy measures as well as the progressing vaccination coverage of the population. Predictions remain uncertain due to the current epidemiological situation. To account for this uncertainty, two scenarios (opening and lockdown scenario) were presented in the WIFO short-term economic outlook for 2021 and 2022. In the present medium-term forecast, these scenarios are projected until 2025. For most key figures, the two scenarios will converge by the end of the forecast period. In the opening scenario, GDP grows by 2¼ percent in 2021 and by 4¼ percent in 2022 (1½ percent and 4¾ percent respectively in the lockdown scenario). By 2025, economic growth weakens to 1.5 percent in both scenarios. Investment activity benefits in 2021 and 2022 from frontloading effects driven by the investment premium but loses momentum in the subsequent years due to linked echo effects. The unemployment rate rose significantly in the wake of the COVID-19 crisis and is not expected to return to its pre-crisis level (7.5 percent) until 2025. The budget deficit amounts to 7.1 percent in the opening scenario in 2021 and falls to 2.5 percent by 2025 (lockdown scenario 2021: 7.7 percent, 2025: 2.8 percent). The government debt-to-GDP ratio stood at 84 percent in 2020 and is projected to increase to around 86 percent by 2025 (88 percent in the lockdown scenario; +15.5 and +17.5 percentage points, respectively, compared to the 2019 pre-crisis level).