Austria's Economy to Gain Some Steam: Expected to Exit the "Longest Weakness Phase of the Post-War Period" in 2026
Austria's expected stint in the "prolonged postwar vulnerability" may continue until the year 2026.
Ever since 2023, Austria's economy has been on a downward spiral, with shrinking growth for two consecutive years. However, economists are bullish that the worst is over. In fact, the Vienna-based WIFO institute forecasts a minor revival in 2025, with stagnation, followed by a significant jump of 1.2% in GDP in 2026.
As the global economy recovers, Austria's economy is poised to receive a much-needed boost, with a surge in both exports and domestic demand. After two years of contraction, the Austrian economy has finally crawled out of the trenches, albeit still vulnerable to potential setbacks.
The global economy is not the only factor to watch. Austrian exports are export-oriented and highly susceptible to geopolitical risks and uncertainties surrounding international trade policy realignments. On the positive side, inflation remains relatively high compared to other countries, and it's predicted to stabilize at 2.9% this year, eventually dropping to 2.2% by 2026. Despite this, pressing inflation in the service sector is hindering a speedy decline in prices.
A strong real wage increase in the previous year may lead one to anticipate an instant surge in private consumption. However, wage policy faces two significant obstacles: demand shortages due to the erosion of price competitiveness resulting from reckless nominal wage hikes in the past, and labor shortages due to adequate labor supply.
Experts predict an increase in unemployment rates, despite labor scarcity in the market, primarily due to an escalating labor supply. The unemployment rate is expected to reach 7.5% in 2025, before declining slightly to 7.3% in 2026.
In essence, Austria's 2026 economic growth is projected to be supported by a favorable global environment, balanced growth in exports and private consumption, sector-wide recovery including manufacturing and construction, and a rebound in investment activity. [1][2][5]
- Economic Projections
- Austria
- The expected economic revival in Austria in 2026, as projected by economists, might be bolstered by the implementation of favorable community policies and employment policies, aiming to stimulate private consumption and investment activity.
- To ensure sustained economic growth in Austria, potential financial adjustments in their business strategies could be necessary for employers to keep up with the anticipated increase in labor supply and maintain a competitive edge in the global market.
