Austria's Economy: Once Again Bringing Up the Rear in EU Growth
Austria once again ranks among the bottom performers in the European Union in terms of economic development in 2026. The EU autumn economic forecast, presented in Brussels, predicts only 0.9 percent growth in gross domestic product (GDP) for the Alpine republic, the third-lowest figure among all EU countries. Only Ireland (+0.2 percent) and Italy (+0.8 percent) are expected to perform worse.
As expected, Austria ranks among the lowest performers in the EU in terms of economic development in 2026. / Picture: © Vindobona.org
The EU Commission forecasts growth of 0.3 percent for Austria in the current year and 1.2 percent for 2027. Although these figures represent an improvement on the spring forecast, which predicted a contraction in GDP, the overall situation remains challenging.
High budget deficit and persistently high inflation
In addition to subdued economic growth, the budget deficit and inflation are causing particular concern. At 4.4 percent of economic output, this year's deficit will significantly exceed the EU's permissible limit of 3.0 percent. Although the deficit is expected to fall slightly to 4.1 percent next year, it is forecast to rise again to 4.3 percent in 2027. Austria is not alone in having these poor deficit figures. In addition to Germany, Belgium, France, and other countries will also fail to meet the Maastricht limit of three percent in 2026. Due to its high deficit, Austria is under special observation by the EU Commission in the ongoing EU deficit procedure, which will present its fall package of recommendations for the European Semester next week.
According to the forecast, Austria's inflation rate will again be well above the EU average of 2.5 percent and the eurozone average of 2.1 percent in 2025, at 3.5 percent. The domestic inflation rate is expected to fall to 2.4 percent in 2026 and 2.2 percent in 2027. Inflation in the eurozone will move closer to the European Central Bank's target of two percent and is expected to be 2.0 percent in 2027.
Political reactions: calls for reforms and bureaucracy reduction
The weak figures are prompting Austrian politicians and businesses to take action. European Affairs Minister Claudia Plakolm (ÖVP) commented on the poor forecast by calling for “tangible results and tangible relief” in the reduction of bureaucracy. She emphasized the need to take a holistic view of the location, as Austrian companies are strongly export-oriented. Plakolm also criticized the current proposal for the Multiannual Financial Framework in Brussels, which provides for an increase in Austria's contribution of 40-50 percent without a compensation mechanism. She said this was unacceptable in view of national budget consolidation and the deficit procedure.
FPÖ economic spokesperson Barbara Kolm then criticized Plakolm, as reported by ORF, saying that although the ÖVP preaches deregulation, it agrees to every new EU bureaucratic burden in Brussels, and called for a reduction in energy taxes and tax reform. The Federation of Austrian Industries (IV) described Austria's renewed ranking among the lowest-growth countries as a “further wake-up call” for necessary structural reforms.
EU growth stronger than expected so far, but uncertainties remain
The EU Commission emphasized in a press release that economic growth in the EU had exceeded expectations in the first three quarters of 2025. Growth will continue at a moderate pace during the forecast period despite a difficult external environment, with private consumption and investment in particular seen as the main drivers.
However, the responsible EU Commissioner, Valdis Dombrovskis, warned that the forecast was subject to “considerable uncertainty”. In particular, he warned that US trade policy decisions and the reactions of other key players, such as China, could dampen global trade, and that the impact of current tariffs on the European economy could be greater than expected. He called for efforts to increase competitiveness and unlock Europe's full growth potential to be redoubled.