The global economy weakened considerably over 2018,
especially as a result of mounting trade tensions between the
US and China. The struggles of Germany's manufacturing
industry, its automotive industry in particular, have also been
a drag on economic growth in Europe. Furthermore, the
uncertainty over Brexit and post-Brexit relations between the
UK and the EU has created heightened risks for economic agents
and companies, dampening demand for investment.
While economic activity in Austria has been slowing amid
weakening global growth, resilient domestic demand is
mitigating the effects of lower contributions from net exports.
Following booming growth in 2017 and 2018 (+2.7%), the
Oesterreichische Nationalbank (OeNB) expects real GDP growth to
weaken in 2019 (+1.5%) and to then rebound slightly and level
off in 2020 and 2021 (+1.6%).
The growth setback in East Asia has added to the
deceleration of global economic activity and trade. Since
global import growth was further weakening in 2019, Austria's
export industry has started to do less well. Export growth is
likely to slow further until mid-2019 and consequentially,
exports are projected to grow only moderately in 2019 but
While the global economy has been dampening GDP growth in
Austria, strong domestic demand continues to be a stabilising
factor. The booming economy facilitated strong wage settlements
for 2019; a higher tax relief for families supports this
further. In 2020 and 2021, disposable household income is
expected to grow at a slightly slower pace, and as a result so
is private consumption.
Alongside private consumption, growth of gross fixed capital
formation will be driving economic activity in Austria. While
the contributions to GDP growth from investment in equipment
have become increasingly weaker since early 2019, the
contributions from construction investment to total gross fixed
capital formation have been outpacing long-term averages. This
trend will remain in place until the end of the year.
The labour market has continued to strengthen. Employment
growth peaked in late 2017 and has since been decelerating,
nevertheless the outlook for 2019 as a whole is 1.6%. Looking
ahead, employment growth is expected to reach 1.1% in 2021.
Unemployment is forecast to drop slightly to 4.7% in 2019 and
to remain stable until 2021.
HICP inflation is forecast to run to 1.7% in 2019 and then
remain unchanged. Compared with 2018 this implies a 0.4
percentage point reduction, which is attributable above all to
the subdued increase in energy prices. Core inflation will
exceed HICP inflation over the forecast horizon.
The general government is forecast to reach a surplus in
2019. The surplus will be driven mainly by revenue-enhancing
conditions and a further decrease in debt servicing costs.
These two factors will remain instrumental in the two
subsequent years, driving the surplus up to 0.5% of GDP in
The fiscal projections are based on a no-policy-change
assumption; only small parts of the announced tax reform are
included. The projected decline of the debt-to-GDP ratio to
65.3% would reinstate 2007 conditions.