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Austrian Economy Officially in Recession

Economy © photocase.com/Chobe

© photocase.com/Chobe

May 22, 2009

Stabilization in 2010

The Austrian economy is officially in a recession. After a slight contraction of economic growth in the final quarter of 2008, GDP will decline even faster this year to an annual rate of 2 – 4%. Economists expect the Austrian economy at least to stabilize in 2010 as the effects of the European Central Bank’s monetary policy and Austrian governmental spending become visible. The Austrian inflation rate remains low and there is also room for further interest rate cuts. Contrary to the U.S., retail sales remain strong and December 2008 even showed a surprising 2% growth. Unfortunately Austria will see a rise in unemployment and fewer job vacancies in the next months. Unemployment is expected to rise to over 7%. Austria as a very export-oriented country is affected by the dramatic slump in foreign demand. Industries will therefore experience a fall in exports and in overall industrial output this year.

The Austrian government's economic support measures are only kicking in very slowly, and their full impact will not become apparent before the second half of 2008. Combined with the economic program implemented in Germany, which has substantial implications for the Austrian economy, these measures will temper the negative impact of the economic crisis. The additional expenses and lower revenue resulting from the government's two economic support packages will, however, lead to a significant increase in the budget deficit in 2009. 

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