7 August 2001 • Favourable Growth Prospects Beyond the Temporary Downturn. Medium-term Projections for the Austrian Economy Until 2005 • Ewald Walterskirchen

Over the period 2001-2005, GDP in Austria is projected to grow at an annual average 2.4 percent in volume, closely in line with the pace expected for the EU as a whole (+2.5 percent). In the early part, economic growth will be held back by the international cyclical weakness. In the following, activity is assumed picking up from 2.4 percent in 2003 to 3 percent by 2005. In keeping with the underlying international scenario, major stimulus should come from exports and spread to domestic investment.

Inflation is set to abate over the projection period. Boosted by price hikes for crude oil and meat (BSE crisis), headline inflation may peak at 21/2 percent in 2001. As these special factors wear off, and with demand and output slackening, the rate of inflation should fall markedly, before slightly heading up again as from 2004. For the whole period, due to the factors cited, average inflation at 1.8 percent will be higher than the 1.3 percent p.a. recorded over the previous five years.

The trend of employment will be determined by the pace of growth and by wage developments. It is assumed that the number of jobs will rise by 23,000 or 0.8 percent per year, whereby part-time work will increase above-average following the introduction of new child-care allowance in 2002. The rate of unemployment (according to Eurostat) will first remain flat, before moderating to 3.2 percent by 2005.