"Austria's Recovery: On the Road to 2026"
Austria may continue to navigate through the "protracted phase of vulnerability post-war" well into 2026.
Austria's economic woes might finally come to an end, according to the Vienna-based WIFO Institute's forecasts. After two dreadful years of recession, they predict a meager stagnation in 2025, followed by a 1.2% growth in GDP in 2026. This projected comeback will be fueled by an uptick in both exports and domestic demand as the global economy perks up.
The Austrian economy has been enduring the longest slump since World War II, with a 1.0% annual decline in GDP for the past two years. However, recovery signs are starting to surface. Despite geopolitical risks and uncertainties about international trade, there's optimism on the horizon.
Inflation, though, remains an obstacle. The WIFO Institute anticipates a 2.9% inflation rate this year, dropping to 2.2% in 2026. Persistent inflation in the services sector is one of the factors hindering a swift decline in prices.
Private consumption, despite a strong increase in real wages last year, is unlikely to get a quick boost. Wage policy remains stuck between two production-hampering factors: demand shortages due to loss of price competitiveness from previous years' high nominal wage increases and labor shortages.
Looking at the labor market, experts predict a rise in unemployment, despite the skills shortage. This surge is mainly due to the projected strong expansion of the labor force. The unemployment rate is expected to climb from 7.0% in 2022 to 7.5% in 2024 before falling to 7.3% in 2026.
Some key factors contributing to Austria's recovery in 2026 include a gradual rebound of private consumption, moderate expansion of external demand, improved investment climate, sectoral contributions to growth, inflation moderation, and the end of recession and return to growth.
However, vulnerabilities remain. External environmental risks, fiscal consolidation pressure, uncertainty and geopolitical risks, and labor market concerns could makes the recovery shaky and prone to setbacks.
[1] Source: Financial Times[2] Source: The Local[3] Source: Reuters[4] Source: Statista[5] Source: OECD Economic Outlook
- Austrian economic recovery in 2026 is expected to be supported by an improvement in the employment policy, as indicated by a gradual rebound of private consumption and a moderate expansion of external demand.
- As part of the recovery strategy, the government may need to address financial concerns related to business operations, including potential adjustments to community policy and employment policy to attract investments and sustain growth.
