"Austria's Economy on the Rise Again"
Austrian recovery from the "prolonged spell of postwar vulnerability" may not transpire before 2026.
After a rough patch, Austria's economy seems to be turning a corner. According to the Vienna WIFO Institute's projections, Austrian GDP will stagnate in 2025, but it's anticipated to grow by a healthy 1.2% in 2026.
The Alpine republic has experienced a prolonged weakness phase in its post-war history, but the downturn might be over. "There are increasing signs of recovery, albeit tentatively and susceptible to setbacks," the institute notes. The global economy's resurrection is expected to bolster both exports and domestic demand, giving the Austrian economy a much-needed boost.
Over the past two years, Austria’s GDP has contracted by 1.0% each year. The export-driven economy faces geopolitical risks and uncertainties about the realignment of international trade policies, making the forecast a bit murky. However, inflation remains high compared to other countries. The WIFO forecasts inflation to stabilize at 2.9% this year and fall to 2.2% by 2026. High inflation in the service sector is said to be one of the factors holding back a rapid decline in prices.
Private consumption, notably consumer spending, is expected to grow by about 1.4% in 2026. Improved consumer sentiment and positive spillover effects from Germany's economy are anticipated to prop up this sector. All sectors are expected to contribute positively to growth starting in 2026. Manufacturing, which has been in the red for two consecutive years, is showing signs of recovery. The construction sector, which has been in a rut, is also expected to grow in 2026. Trade activities, which stagnated in 2025, are also expected to see a growth of 1.4% in 2026. Exports and investment activity are forecast to rebound, with goods and services exports increasing by 1.7%, and investment activity picking up by 1.8%.
Overall, the WIFO Institute anticipates GDP growth of 1.2% in 2026, paving the way for a modest but clear recovery. Despite the positive outlook, the recovery is predicted to be fragile, reflecting ongoing risks and the lingering impacts of previous economic weaknesses. However, with fiscal discipline and the successful implementation of austerity measures, the fiscal conditions may stabilize and economic confidence could be restored.
In the predicted economic recovery of Austria, the implementation and execution of appropriate community and employment policies could prove beneficial for job seekers and businesses. The anticipated growth in the economy, as per the WIFO Institute's projection, may also contribute to an increase in finance investments within the Alpine republic's business sector.
