Inflation & growth

EU report: Austria has two major construction sites

Inflation is particularly noticeable when shopping in supermarkets.

(Bild: APA/Georg Hochmuth)

The spring economic forecast published by the EU Commission in Brussels on Wednesday continues to predict weak growth prospects for the EU, the eurozone and Austria: the Republic is clearly lagging behind in comparison - and not just in terms of economic growth.

The EU economy is expected to grow by 1.0 percent this year and by 1.6 percent in 2025. For the eurozone, the Commission is forecasting 0.8 and 1.4 percent respectively. A small increase of 0.3 percent is expected for Austria in 2024, before domestic economic output is set to rise by 1.6 percent in 2025.

Annual inflation is expected to fall faster than originally assumed: In the countries with the common euro currency, for example, it is expected to fall further to 2.5 percent in 2024 and to 2.1 percent in 2025, while inflation in the EU is expected to fall from 2.7 percent this year to 2.2 percent next year. At 3.6 percent this year and 2.8 percent in 2025, the Austrian figure is still above average.

Unemployment stable
Unemployment remains fairly stable in all areas: 6.1% is expected for the EU this year and 6.0% next year, and 6.6% and 6.5% respectively for the eurozone. Austria is below the average at 5.3 and 5.1 percent respectively (according to the Eurostat definition).

The Commission emphasizes that "after the economy largely stagnated in 2023, the better-than-expected growth at the beginning of 2024 and the continued decline in inflation have created the conditions for a gradual pick-up in activity in the forecast period".

This is primarily due to an increase in private consumption, as the continued growth in real wages and employment will result in higher disposable incomes.

Uncertainties will remain
However, the ongoing Russian war of aggression against Ukraine, the Middle East conflict and other geopolitical tensions will increase uncertainties and downside risks, the Commission warns in its report.

In addition, persistent inflation in the USA could lead to delayed interest rate cuts, thereby worsening global financial conditions. The risks associated with climate change are also increasingly weighing on forecasts.