Spring Forecast of the Austrian Economy 2025–2026

Third year of recession intensifies need for structural reforms

In 2024, the Austrian economy remained in a recession, with GDP contracting by 1.2 %.

According to the IHS forecast, 2025 will mark the third consecutive year of a recession, with output projected to decline by 0.2 %. Budget consolidation by the new federal government is expected to dampen growth by 0.3 percentage points. However, a cautious rise in private consumption, lower interest rates compared to the previous year, and an economic upturn in the euro area should help Austria return to modest growth in the second half of 2025. In 2026, GDP is forecasted to increase by 1.1 %. Consumer prices are projected to rise by 2.9 % in 2025, slightly exceeding IHS’s winter forecast. In 2026, inflation is expected to ease to 2.0 %. The unemployment rate is anticipated to increase to 7.5 % in 2025 before slightly declining to 7.3 % in 2026. Significant downside risks remain, driven by a potential escalation of international trade conflicts initiated by the Trump administration.

IHS Economic Forecast