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Austria: Economic Growth Slowly Getting in Gear

Published: March 27, 2014; 12:41 · (Vindobona)

Wifo (Austrian Institute of Economic Research) projects economic growth in Austria to revive again only at the end of this year.

Economic growth in Austria is continuing to stand on the brake. / Picture: © Flickr

Growth will still be restrained at the end of this year and the beginning of next, which is also the case for Europe as a whole as many countries have not yet fully overcome the financial crisis. The necessity to consolidate public households has a dampening effect on the upward trend.

The Austrian economy, according to Wifo, is expected to growth by 1.7 percent in 2014 and by 2.0 percent 2015, which is still too low to reduce the high unemployment rate. While the inflation rate is declining it is still high compared to other countries in the European Union. Price increases are expected to be not as high both in 2014 and 2015. The consumper price index (CPI) is expected to increase by 1.8 percent in 2014 and by 1.9 percent in 2015, according to Wifi, and according to IHS by 1.9 percent this year. Last year the inflation rate came at 2.0 percent.

The economy of emerging countries, which has so far had a stimulating effect on the global economy has been very restrained since 2013 and shows regional differences. Economic recovery in the Eurozone is still dragging behind. The financial crisis has not yet been completely overcome, and the fiscal policy requires most of the EU member states to show restraint. After the recession was overcome last year a minor growth of aroune one percent is expected this year, which will increase to 1.5 percent next year. The markets in CEE, which are of great importance for the Austrian economy, have shown a positive development since 2013. The high indebtedness of the private sector, however, has a restraining effect on expansions which is why the catch-up process is weaker than before the crisis.

The costs of the downsizing of Hypo Group will result in the budget deficit quota to increase by one percentage point to around three percent of GDP. However, as soon as 2015 the deficit is expected to decrease significantly to 1.2 or 1.4 percent of economic performance.

While the Austrian Institute of Higher Studies (IHS) projects economic growth of 1.7 percent in 2015, Wifo expects a growth rate of 2.0 percent. Wifo expects the unemployment rate (according to Austrian calculation methods) to come at 8.0 percent this year and increase to 8.1 percen next year while IHS projects the unemployment rate to come at 7.8 percent this year and drop slightly to 7.7 percent next year. In 2007, shortly before the outbreak of the financial crisis, the unemloyment rate only came at 6.2 percent while last year it came at 7.6 percent.