Image: Erwin Wodicka
The economic mood in Austria brightened noticeably at the beginning of the year. Compared to December, the Bank Austria economic indicator rose by one point in January, which corresponds to the strongest monthly improvement in a year and a half. However, the value of minus 1.4 points still points to a slight decline in economic development, as announced by Bank Austria on Wednesday.
With the exception of construction, the industrial mood brightened in January in all sectors of the economy. In the service sector in particular, business expectations have increased significantly, supported by the tailwind of the recovered consumer sentiment. The mood in the service sector has thus improved for the third month in a row and almost reached the long-term average. A good start to the winter season gave the tourism industry a further boost, and retail business was also better than expected. In the construction industry, on the other hand, less full order books, especially in residential construction, weighed on the mood. Overall, the industrial mood remains in the pessimistic range. The decline in new business and concerns about competitiveness in the export business cloud the picture.
Low growth rate expected
“After the weak start to 2023, the prospects for a recovery from spring are very good, but the pace of growth is likely to remain low,” said Bank Austria economist Walter Puschedl. “The sluggish decline in inflation and the changed financing conditions following the tightening of monetary policy by the ECB will weigh on the pace of the upswing. In 2023 as a whole, we therefore expect the Austrian economy to continue to stagnate with GDP growth of 0.3 percent.” For 2024, the economists expect a faster pace of recovery and economic growth of 1.2 percent. Above all, the development of private consumption will be decisive.
After the significant increase in inflation at the beginning of the year, according to the economists, inflation should now have peaked. The economists expect inflation to average 6.5 percent in 2023 and expect inflation to drop to an average of 3 percent in 2024.
The European Central Bank will tighten the monetary policy reins a little further in the current year, but the peak will be reached in mid-2023, Bank Austria chief economist Stefan Bruckbauer expects. For 2024 he finally expects a turnaround in European monetary policy.
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