Economic Recovery According to WIFO Still a Long Way Off in Austria
While the economy in the eurozone has largely stabilized, Austria remains in a phase of stagnation, according to the latest economic report from the Austrian Institute of Economic Research (WIFO). Domestic growth is stagnating, the labor market is weakening, and inflation is rising again more sharply. Industry in particular is in a prolonged recession, while only public services are showing momentum.
It remains to be seen whether and when Austria's economy will emerge from stagnation. Given the difficult global situation and domestic political challenges, forecasts are fraught with uncertainty. / Picture: © Wikimedia Commons / Gugerell / CC0
Although the mood among Austrian companies has brightened slightly, skepticism continues to prevail. One of the main reasons for the ongoing slump is the combination of unfavorable economic policy measures, which have driven up electricity prices by around a third since the beginning of the year. This price increase, combined with stronger price inflation for services, means that inflation in Austria is once again higher than the eurozone average.
The weak economy is also having a significant impact on the labor market: unemployment is rising, while the number of job vacancies and employment in the private sector are falling. Only public and public-related services are recording employment growth.
Pension debate: WIFO and AK at loggerheads
A much-discussed topic in the current economic analysis is the increase in the retirement age for women. WIFO economist Stefan Schiman-Vukan emphasizes in the report that the gradual increase in the standard retirement age for women since 2024 has led to noticeable employment growth among the over-60s without displacing younger workers. He sees the measure as an “effective means of increasing employment.”
However, the Chamber of Labor (AK) takes a much more critical view of the situation. Ines Stilling, AK Head of Social Affairs, warns companies: “If you want people to work longer, you must first and foremost provide them with the jobs to do so.” She points out that two-thirds of companies already do not hire people over the age of 60. The AK is therefore calling for an employment package for older people with a bonus-malus system to motivate companies to hire older employees.
ECB pauses interest rate cuts, global situation remains tense
Internationally, the global balance of power is tense. In the US, the recently introduced high tariffs are accompanied by a slowdown in economic growth and accelerated inflation. In China, on the other hand, overproduction and the ongoing real estate crisis are putting pressure on prices, leading to deflationary pressure.
The eurozone, on the other hand, remained stable in the first half of 2025. Unemployment remained low and inflation reached the European Central Bank's (ECB) medium-term target of 2.0 percent. In response, the ECB paused after a series of interest rate cuts and left its three key interest rates unchanged. The key interest rates for the deposit facility, main refinancing operations, and marginal lending facility therefore remain at 2.00 percent, 2.15 percent, and 2.40 percent, respectively. The ECB's decision has a dampening effect on the economy, as it makes loans less attractive for businesses and consumers.