Cyclical Upswing, but Lasting Uncertainty. Economic Outlook for 2010 and 2011

Benefiting from the depreciation of the euro in the first half of the year, euro area exports should keep their upward trend in the remainder of 2010. At the same time, however, economic growth is set to slow down somewhat in the USA and in Asia. In 2011, the cyclical upswing in the euro area will maintain a moderate pace. While industrial activity should prove resilient, the high government deficits and imminent consolidation moves, hesitant private investment behaviour, the need for financial sector reform and macroeconomic imbalances within the euro area will weigh on demand and output growth. For Austria, WIFO expects real GDP to expand by 2 percent in 2010 and 1.9 percent in 2011. The revival of business activity will contribute to improvements in the labour market and in public finances. By 2011, the unemployment rate should ease to 6.8 percent of the dependent labour force, and the government deficit, including the planned consolidation measures, should narrow to 3.5 percent of GDP.