Deficit Forecast for 2024 Rises to 3.3 %: Austria Facing Economic Challenges
The Ministry of Finance has raised its deficit forecast for the 2024 budget to 3.3% of GDP, which puts the deficit above the Maastricht limit of 3%. The reasons for this development include the sluggish economic recovery, the effects of the flood disaster, and the increase in the climate bonus. This represents a significant deterioration, as the forecast in March was still 2.9%.
The measures taken by the government to stabilize the economy, particularly concerning flood damage and climate change, will be decisive in determining whether the deficit can be reduced again in the medium term. / Picture: © Wikimedia Commons / Gugerell / CC0
Economic experts such as the Fiscal Council and the financial institutes WIFO and IHS had already expected a deficit of over 3%. The Fiscal Council is even forecasting a figure of 3.4%. The weak economic development and the unpredictable consequences of natural disasters have a particularly negative impact. Austria's debt ratio is now expected to be 79.3% of GDP in 2024, corresponding to an increase compared to 2023 (77.8%). The financial situation could deteriorate further in light of these developments.
Causes and effects
The adjustment to the forecast is due to several factors: firstly, the hoped-for economic recovery has failed to materialize, weakening tax revenues and increasing government spending. In addition, the flood disasters are having a severe impact and the financial damage is not yet fully foreseeable. Added to this is the increase in the climate bonus, which was decided given rising energy costs. These measures, although necessary, are contributing to the increase in the deficit.
Austria's debt ratio, which is forecast at 79.3% of GDP, is therefore well above the EU's recommended limit of 60%. This could lead to additional pressure from Brussels, which could call on Austria to take measures to reduce the deficit. If the economic situation does not stabilize, there is a threat of further cuts, which could also affect government investment and social benefits.
Economic experts warn that 2024 could be economically challenging, especially if the economy remains weak. In the coming days, the leading economic research institutes WIFO and IHS will publish their autumn economic forecast, which should provide further insight into the economic outlook. It is eagerly awaited whether Austria will be able to fall below the 3% threshold again or whether the deficit will remain above this level.