Inflation falls in 2026

Growth forecast gives rise to slight hope

According to forecasts, Austria's economy will slowly recover from this year onwards.(Bild: Li-Bro - stock.adobe.com)

The SNB's new growth forecast gives rise to slight hope: although the economy is only expected to grow slightly in the coming years, inflation will fall in 2026. In 2025, there should also be slightly more growth than previously assumed.

For 2025, the central bank (OeNB) now expects real GDP growth of 0.6% - in September it had assumed just 0.3%. For 2026 and 2027, however, the economists expect growth of 0.8% and 1.1% respectively, as in the previous forecast (see chart below).

Wifo and IHS more optimistic
The Economic Research Institute (Wifo) and the Institute for Advanced Studies (IHS) had previously also raised their expectations for this year. According to their calculations, gross domestic product (GDP) is only expected to grow by 0.5 percent in real terms. However, at 1.2 and 1.0 percent respectively, the two institutes are slightly more optimistic than the central bank for 2026.

According to forecasts, Austria's economy will slowly recover from this year onwards.(Bild: Li-Bro - stock.adobe.com)

Situation remains tense
Although the economy is slowly getting back on the road to recovery, the situation remains tense, the OeNB summarizes its forecast. In particular, losses in price competitiveness, tariffs and smouldering trade conflicts will continue to pose challenges for the export industry. Although investments and consumption are growing somewhat more strongly again, "global economic uncertainty continues to make companies and households cautious".

Inflationary pressure is easing
At least inflationary pressure is easing. For 2025 as a whole, the National Bank economists still expect the Harmonized Index of Consumer Prices (HICP) to rise to 3.6%, which is 0.7 percentage points more than in 2024 (2.9%). Next year, however, a decline to 2.4% is expected, followed by a further decrease to 2.1% in 2027 and 2028 respectively.

The main reason for this is the effect of the energy subsidies that expired this year and will no longer apply next year. However, weaker wage growth and the appreciation of the euro also dampened the rise in prices.

Budget gap is only slowly narrowing
Despite the government's austerity measures, the budget deficit is likely to remain well above the Maastricht limit of 3 percent this year. A budget balance of minus 4.5 percent of GDP is forecast for 2025. Although it is likely to improve to minus 4.2 percent of GDP in 2026 and 2027, further consolidation efforts will be necessary, the central bank writes in its forecast.