WIFO Director Felbermayr Speaks Out in Support of Austria's Economy at the Austro-British Society

The outlook for the event organized by the Austrian-British Society at the Diplomatic Academy of Vienna seemed bleak: In recent years, the Austrian economy has struggled with weak exports, declining competitiveness, and a persistent slowdown in consumer spending. However, in his presentation, WIFO Director Gabriel Felbermayr painted a nuanced picture—and defended the federal government on many points against sweeping criticism.

Global Shocks Weigh on the Domestic Economy

A central point in Felbermayr’s analysis was the distinction between homegrown problems and external pressures. As a small, open economy, Austria is highly exposed to global crises such as supply chain disruptions in the Middle East, the tight gas market, and U.S. tariffs.

Austrian industry is disproportionately affected due to its focus on mechanical engineering, steel, and aluminum. The actual tariff burden on domestic exports to the U.S. stood at around 9.5 percent in the summer (EU average: 7.6 percent). While the U.S., as a net exporter, is protected from price shocks, Austria must purchase gas on the world market.

The relaxation of Germany’s debt brake in March 2025 drove up bond yields across the entire eurozone. This also increased financing costs for Vienna, without domestic policymakers having any influence over the matter.

Self-inflicted problems: Failure to address pension and long-term care issues

Despite these external factors, Felbermayr did not hold back in his criticism of domestic structural policy. The fact that global trade is growing despite crises, that other EU countries such as Spain and Portugal are significantly more optimistic, and that per capita purchasing power in Austria has dropped noticeably underscores the need for domestic action.

The WIFO director illustrated the situation regarding pensions particularly starkly: Government subsidies to the pension system amount to around 32 to 33 billion euros annually. Given this scale, he described the latest reform ideas as “homeopathic.” Felbermayr also called for bold reforms in education, the labor market integration of migrants, and the issue of over-academization, as well as a stronger focus on the actual needs of skilled trades and industry.

Rays of Hope and a Painstaking Recovery

Despite all the challenges, Felbermayr rejected the notion of a general industrial decline. Compared to Germany, he said, Austria’s industry is in a more robust position—thanks in particular to the pharmaceutical sector and close ties to the dynamic markets of Central and Eastern Europe. Furthermore, following government interventions, inflation is now below the eurozone average. “It’s performing significantly better than public perception suggests,” said Gabriel Felbermayr regarding the federal government’s performance.

For the coming years, however, the WIFO expects only modest growth of 0.9 percent for the current year and 1.1 percent for the following year, according to its summer forecast.

Austro-British Society

WIFO