Austria Faces Slow Growth: Only 1% Annual Increase Expected Until 2030, IHS Forecasts [premium]

Austria is bracing for a prolonged period of slow economic growth, with forecasts indicating an average of just 1% annually until 2030. This projection follows two years of recession and dashes hopes for a robust recovery among economists. The Austrian economy is settling into a "step-by-step" long-term growth pattern.

The outlook becomes even more sobering when population growth is factored in. The Institute for Higher Studies (IHS) predicts that Austria's real GDP will increase by slightly over 5% between 2025 and 2030. However, with the population expected to rise from 9.21 million to 9.33 million by 2030, the per capita GDP growth will be a mere 0.7% per year.

This economic weakness is increasingly structural. The IHS estimates Austria's production potential to grow at an average of 0.8% per year until 2030. Even under favorable conditions, such as normalizing energy prices, stable inflation, and the absence of new geopolitical shocks, the economy is unlikely to accelerate significantly. New trade wars could easily plunge the fragile economy back into recession.

Furthermore, the consolidation of public finances presents a grim picture. Austerity measures are dampening real incomes, consumption, and public investment. Despite these efforts, the IHS forecasts a budget deficit of 3.6% by 2030, while the debt-to-GDP ratio is projected to climb from 81.5% to 87.5%. Austria appears to be saving without achieving sustainable fiscal health, a situation exacerbated by rising expenditures on pensions, healthcare, and interest payments. The labor market shows a deceptive improvement, with the national unemployment rate expected to fall from 7.5% this year to 6.4% by 2030, but this is only partly due to increased demand for labor.