National Bank forecast

Gloomy outlook: Growth falling, deficit rising

The closer the coming year gets, the worse the country's economic forecasts become. The Austrian National Bank has now significantly increased the forecast budget deficit and lowered the growth prospects.

In their forecast published on Friday, the monetary authorities expect new borrowing of 3.7 percent for the current year. By 2025, the deficit is likely to rise to 4.1 percent of economic output. The OeNB is thus assuming a higher level of new debt than Wifo and IHS in their last forecast in October.

Also well above the Maastricht limit in 2026 and 2027
For 2026 and 2027, the OeNB also expects new debt to be well above the Maastricht limit of 3.0% required by the EU, with deficits of 3.6% in both years. The deterioration in the deficit in 2025 is "primarily due to the delayed adjustment of pensions and public salaries to inflation and the poor macroeconomic environment", according to a statement from the National Bank. However, a reduction in the deficit would also entail a "significant downside risk" for the domestic economy.

The growth outlook is also rather pessimistic. The OeNB expects economic output to fall for the second year in a row this year and has lowered its forecast to minus 0.9 percent. For 2025, the monetary authorities expect growth of just 0.8 percent. Three months ago, expectations for both years were 0.2 percentage points better. Both figures are noticeably worse than in the June forecast. The OeNB also expects the unemployment rate to rise to 7.0 percent this year and 7.4 percent in 2025. The two percent inflation target is expected for 2027.

"No signs of an imminent upturn"
"The weak economy, structural change in the European automotive industry and high energy and wage costs are weighing heavily on Austrian industry and have led to a decline in exports in 2024," writes the OeNB. Private consumption also remains weak and there are "currently no signs of an imminent upturn". The OeNB therefore does not expect significant growth of 1.6 percent until 2026, although this is likely to slow back down to 1.3 percent in 2027.