After a slight GDP decrease of -0.9% in 2024, the Austrian economy is expected to regain momentum, with GDP growing by 0.3% in 2025 and accelerating to 1.3% in 2026, according to UniCredit Bank Austria. This recovery will be driven by stronger household consumption, improving business conditions and supportive monetary policy. However, the pace of growth will remain modest, reflecting ongoing challenges in key sectors such as manufacturing and construction.
Labor Market: Stabilization on the Horizon
Although the unemployment rate is expected to rise slightly to 7.3% in 2025, reflecting continued weakness in industry and construction, the economic conditions and job market are expected to stabilize by 2026. With sectors like services and trade gradually gaining strength, employment prospects should become more favorable in the medium term.
Public Finances: Managing the Transition
Austria’s budget deficit reached 3.9% of GDP in 2024, reflecting necessary government support during a challenging period. As the economic situation stabilizes, public finances are expected to gradually improve. However, with the public debt ratio exceeding 80% of GDP in 2025, fiscal consolidation remains a priority to ensure the long-term sustainability of Austria's economy.
Inflation and Monetary Policy: A Positive Shift
Inflation, which temporarily increased to 3.3% at the start of 2025 due to the end of energy subsidies, is projected to decline steadily to 2.5% by year-end and further to 1.9% in 2026. Decreasing inflation, combined with rising real wages, will boost purchasing power and support consumer confidence, aiding the recovery.
The ECB’s proactive monetary policy continues to play a key role. At the beginning of 2025, the ECB cut interest rates by 25 basis points, and further cuts totaling 100 basis points are expected by the end of the year. These measures will reduce borrowing costs, supporting investment and economic growth.
Future Outlook
While challenges remain, Austria’s economy is showing clear signs of recovery. With improving household income, declining inflation, and a more supportive policy environment, the foundation for sustained growth is laid.
