Austria's economy: EU warns of another decline in 2025!

Austria's economy: EU warns of another decline in 2025!

The EU Commission has published a gloomy forecast for the Austrian economy in 2025. How South Tyrol News reports, a decline in gross domestic product (GDP) is predicted, making Austria the only EU country facing an economic contraction this year. Inflation is estimated at 2.9 percent in 2025, above the EU's target of 2 percent.

The deficit is stated at 4.4 percent of economic output, also above the permissible Maastricht value of 3 percent. These figures are significantly worse than the autumn forecasts from November, which predicted economic growth of 1.0 percent and an inflation rate of 2.1 percent.

Looking back on previous years

Austria's economy had already recorded a decline of 1.2 percent in 2024, making the country at the bottom of the EU. The reasons for this negative development are diverse: declining investments, stagnating consumption, high energy prices and rising production costs lead to a difficult economic climate. The unemployment rate remains constant at 5.3 percent.

The EU Commission expects slow economic growth of 1.0 percent for 2026, but still below the average for the EU states. Inflation is expected to be at 2.1 percent, while the deficit at 4.2 percent will continue to exceed the Maastricht limits.

Optimism for 2026?

A bright spot could be the recovery of the Austrian economy in 2025, which could come after two years of heavy declines - GDP contracted by 1.6 percent in 2023. Loud courier Economic growth of 1.0 percent is forecast for 2025. This would place Austria behind countries such as Malta and Ireland, which can expect growth rates of 4.3 and 4.0 percent respectively.

The positive growth is underpinned by a calming of the underlying factors, with an increase in private consumption also expected as the inflation shock is digested. In addition, a revival in demand from trading partners and falling energy prices could stimulate new investments. The construction sector, which has declined 18 percent in the last two years, could also recover with a stimulus package and lower interest rates.

Inflation in Austria is showing the first signs of stabilization and is expected to average 2.1 percent in 2025. This could ease the budget situation, which is already problematic, even if Finance Minister Magnus Brunner remains under pressure. The EU Commission expresses concerns about the budget situation and will contact Brunner in the coming days to discuss forecasts for the deficit, which has increased to 3.3 percent of GDP for 2024.

In summary, Austria faces major challenges in the context of the EU, while hopeful signs of recovery are slowly but surely emerging.