Domestic economy

Per capita income falls: Wifo revises forecast

Head of Wifo Gabriel Felbermayr

(Bild: EXPA Pictures)

The economic research institute will revise its economic forecast downwards, as Wifo head Gabriel Felbermayr announced on Sunday. So far, Wifo has assumed growth of 0.9 percent for this year. This is unlikely to be the case, but at least the economy will not shrink, according to the Wifo boss.

"It looks as if we will have to revise it downwards, but there should still be some growth," said Felbermayr on Sunday's "ZiB 2". Even for Germany, which is "even harder hit than Austria", the German government is forecasting growth of 0.2 percent. "We will probably settle between this minimum value and what we had in December."

This is certainly not good for the people in the country, for the economy as a whole.

Wifo-Chef Gabriel Felbermayr

Per capita income is shrinking
However, as the population is growing, per capita income is shrinking with GDP growth of 0.2 percent. "That is certainly not good for the people in the country, for the economy as a whole." Felbermayr is pinning his hopes on the government's construction package and would like to see a reduction in non-wage labor costs. "Pressure should be taken off" grid fees as a price driver for electricity costs.

"Not surprising" for Kocher
For Economics Minister Martin Kocher (ÖVP), the announced revision of the domestic GDP forecast for 2024 by Wifo is "not surprising". The EU Commission had already lowered the growth prospects for Austria in the current year to 0.6 percent in mid-February, Kocher told the Club of Economic Journalists in Vienna on Monday morning. Kocher expects stronger growth in this country in 2025 if the economy in Germany, Austria's most important export market, picks up again. This is "a slight shift" in growth from this year to next year.

Minister of Economic Affairs Martin Kocher (ÖVP)

(Bild: APA/HELMUT FOHRINGER)

In order to support positive economic development in Austria in the medium and long term, Kocher sees three main areas of action: According to the Minister of Economic Affairs, spending on research and development (R&D) in this country should be increased significantly. In terms of R&D investment in relation to GDP, Austria ranks third in Europe behind Belgium and Sweden, and the goal is first place. In addition, "everything must be done to harness potential on the labor market," said Kocher.

There is still "extremely great potential" in the areas of people approaching retirement, female employment, increases in the hours of part-time workers, unemployed people and immigration. These groups of people have not been the focus of labor market policy in the last 15 years because there has "always been an oversupply" of labor.

The Minister of Economic Affairs takes a positive view of the EU Commission's plan, announced last year, to remove 25 percent of reporting obligations for companies in order to make the EU more competitive. "I think that's very important." Many companies are "at their breaking point" due to a large number of new regulations and laws.

Criticism from the SPÖ and FPÖ
On the occasion of the announced growth revision for 2024 by Wifo, the SPÖ and FPÖ sharply criticized the economic policy of the turquoise-green federal government. The government has "refused to do anything about record inflation for a good two years - the population and companies pay the price for this every day in the form of record prices, and the economy as a whole in the form of unrealized growth and prosperity", said SPÖ economic spokesperson Christoph Matznetter in a statement. "The best economic and social policy would still be a policy that lowers prices and combats inflation."

For FPÖ economic spokesman Axel Kassegger, "the ÖVP and the Greens are constantly trying to suggest to the population that our economy is developing positively and is on the upswing". This is "refuted at regular intervals by economic experts with their bare facts and figures". The government is "incapable of implementing efficient economic policy measures to stabilize Austria's economy in the long term and, above all, to make it competitive again", said Kassegger.