Vienna [Austria], May 20: Austria is projected to experience its third consecutive year of economic recession in 2025, the European Commission said in its latest macroeconomic forecast for the central European country.
This results from low investment, modest consumption and declining exports, exacerbated by international trade tensions. Growth is set to resume only in 2026. The government deficit is projected to be above 4% of GDP in 2025 and 2026, and the government debt-to-GDP ratio is forecast to remain above 80%.
Real GDP contracted by 1% in 2023 and by 1.2% in 2024, due to stagnant consumption and declining investment. The cost competitiveness of the industrial sector has suffered due to high energy prices and strongly increasing unit labour costs. Industrial production declined by 5.4% in 2024. Goods exports shrank by 5.9%, counterweighed by goods imports going down by 7.1%.
In 2025, private consumption is expected to grow modestly, recouping some lost ground after two weak years when consumption per capita declined and saving rates reached historically high levels. Last year's strong real income gains and a slow unwinding of savings are set to support consumption, despite the planned fiscal consolidation measures. Investment is expected to decline further, with low-capacity utilisation in industry weighing on equipment investment. By contrast, construction investment is expected to start recovering slowly, supported by slowly declining housing loan rates. The loss of cost competitiveness and the weakness of the industrial sector in Europe is set to be a drag on Austrian net exports.
Last year, exports to the US, Austria's second most important export destination, grew dynamically reaching 8.5% of total exports, but this year, trade tensions create headwinds for exports.
In 2026, a return to growth is projected, with strengthening private consumption and investment growth turning positive. However, trade tensions are projected to weigh on Austria's economic performance.
Overall, in 2025, GDP is expected to decline by 0.3%. In 2026, growth is projected to pick up to 1%.
Source: Emirates News Agency
