"Significant decline"

Austrians have been getting poorer for five years

(Bild: bilderstoeckchen - stock.adobe.com)

Statistics Austria painted a gloomy picture of the Austrian economy on Wednesday, falling short of the Wifo's GDP flash estimate. "In the last five years, prosperity has declined significantly," concluded head of statistics Tobias Thomas. Austria is still stuck in a recession.

Austria's economy has contracted for the sixth quarter in a row, and there has been an almost continuous decline in industrial turnover since March 2023. From July to September, real gross domestic product (GDP) was 0.6 percent below the same quarter of the previous year and 0.1 percent below the previous quarter, according to preliminary calculations.

"With a drop of 3.7 percent, industry is once again particularly affected, as it continues to suffer from the global economic downturn," Thomas told journalists at the presentation of the "Austrian Economic Barometer".

Decline in services, plus in housing
The important areas of other economic services (minus 2.5 percent), construction (minus 1.7 percent) and trade (minus 1.5 percent) also continued to decline. Moderate growth in the housing sector (1.0 percent) and in public administration (also 1.0 percent) at least partially cushioned the decline, according to the statisticians.

However, the decline in turnover in the manufacturing sector continued in October 2024 and was 1.4% lower than in October 2023. Turnover in industry fell by 2.2%, while construction increased by 3.6% year-on-year. In the entire period from January to August 2024, imports were down by 9.8% and exports by 4.4% compared to the same period in the previous year.

Electricity price brake had a dampening effect on inflation
The November inflation rate is expected to be 1.9%, after 1.8% in both October and September 2024, and thus remains just below the ECB's target of 2.0%. "The trend of moderate inflation rates in Austria is thus continuing", according to the statisticians. Inflation continues to be driven by the services sector. The wholesale price index and the producer price index for the manufacturing sector continued to decline.

Ingolf Böttcher, Head of the Economics Directorate at Statistics Austria, explained that the government's electricity price brake had a dampening effect on inflation, which would cease to apply when the brake expired at the end of the year. In any case, the core inflation rate in Austria is well above two percent.

Wifo has to lower its economic forecast for 2024/25
Due to the worse than expected economic development in the second and third quarters, the Wifo/IHS autumn forecast for 2024/25 will also not be maintained. In October, Wifo economists were still forecasting a 0.6% decline in Austrian economic output this year and growth of 1.0% next year. At the time, Wifo forecast a budget deficit of 3.7 percent of gross domestic product (GDP) for 2024 and 4.0 percent for 2025. In 16 days, Wifo and IHS will present their updated economic forecast.

Based on the GDP figures for the second and third quarters, there is "some downward leeway" in the forecast, said Wifo economist Marcus Scheiblecker when asked by APA. In Germany, the economic outlook for 2025 was recently lowered significantly. In mid-November, the German panel of experts known as the "Wirtschaftsweise" halved its growth forecast for Germany's economy next year from 0.9 percent to 0.4 percent. Scheiblecker does not expect such a correction to be necessary for the forecast for domestic GDP development in 2025. "Initial calculations do not show a halving."

Budget deficit will be higher
Due to the weaker economic development, the budget deficit expected by Wifo in 2024 and 2025 is likely to be slightly higher. Details on the budget balance will be provided in the winter forecast on December 20, according to the Wifo economist. The economic forecast is still being prepared.

The poor figures have brought the NEOS onto the scene today. "Without a bold reform package, there is a threat of a domino effect of bankruptcies. Particularly in view of the tense economic situation, it is important that we keep a close eye on and monitor the development of the economy. The challenges are manifold, from high energy costs to rising unit labor costs, so it will be important to take decisive action," says their member of parliament Sepp Schellhorn.