Expert forecast

Austria faces third “lost year”

The analysts at Raiffeisen Research do not see a turnaround in sentiment in Austria.

(Bild: amazing studio - stock.adobe.com)

Things are looking bad for Austria's economy: it could shrink for the third year in a row in 2025. Raiffeisen Research forecasts that the Austrian economy will shrink by almost one percent. That's a loss of 2,400 euros per Austrian.

Things were already looking bad in Austria in 2024: The Alpine republic was bringing up the rear in Europe in terms of economic growth. According to the analysts at Raiffeisen Research, the situation is set to continue as there is "no improvement in sight in the short term". They expect the Austrian economy to shrink by 0.7% this year - making 2025 the third year of recession since the start of the coronavirus pandemic.

Here you can see the Raiffeisen Research forecast in detail.

Other institutes anticipate at least mini-growth
The bank is not alone in its cautious outlook, although other experts do anticipate a small increase. As reported in mid-January, the Austrian Institute of Economic Research (Wifo) was still forecasting economic growth of 0.6% in Austria. The Institute for Advanced Studies (IHS) is forecasting growth of 0.7 percent.

2025 is the third "lost year"
 Raiffeiesen Research does not currently see a turnaround in sentiment among either industry or consumers. According to senior economist Matthias Reith, Austria is even heading for its third "lost year". Private consumption is one of the major economic disappointments of 2024.

This is because when consumers' income increases, they don't spend it. Instead, it ends up in the piggy bank. "A noticeable revival in private consumption is therefore questionable. The 'consumer strike' could go into extra time in 2025," concludes the Raiffeisen economist.

Government austerity package comes at the wrong time
However, it is not only private households that are influencing the economy; the government is also taking Raiffeisen Research to task. As necessary as the austerity package announced by the new federal government is, it comes at the wrong time from an economic perspective, says Reith. "The economy is at a standstill and actually needs a boost, but instead obstacles are foreseeably being placed in its path. Of course, the structural problems would not be solved by stimulus aid; the economy would be on the road with the handbrake on, so to speak," says Reith.

US customs policy could become expensive
A look at the USA also gives the experts cause for concern. The US market has been an important pillar in recent years. This is because Austrian exports to the USA were able to partially compensate for the fact that less was exported to other countries. However, if US President Donald Trump introduces even more tariffs, this could be expensive for Austria: Punitive tariffs could cost Austria at least 0.5 percentage points of growth this year, according to the economists at Raiffeisen Research.