Image: VOLKER Weihbold
“The brightening of the economy since the turn of the year was interrupted by the downturn in domestic industry and in some service sectors,” says the bank’s chief economist, Stefan Bruckbauer, in a press release.
For the first quarter of this year, Bank Austria expects a decline in economic output compared to the final quarter of 2022. “Weak consumer demand as a result of high inflation has severely restricted development in many service areas, especially in retail,” says Bruckbauer. “In addition, there was a lack of support from the global economy, which was reflected in weaker export figures and weighed on the industry.”
After four months of growth, the mood in the service sector deteriorated again, which contributed significantly to the deterioration of the overall index. Accommodation and hospitality services as well as retail are particularly affected. In addition, the mood in the industry has deteriorated. Here, “declining demand in the plastics, electrical and paper industries, as well as in mechanical engineering, among other things,” had a negative effect. On the other hand, the climate among consumers and in the construction industry has improved somewhat.
However, there is optimism for the year as a whole. With a reduction in inflation, consumption will again become a pillar of demand. “After the weak start to the year and a hesitant start to recovery, we continue to expect only moderate economic growth of 0.7 percent for 2023 as a whole. For 2024, we are assuming a slight recovery to 1.2 percent,” says bank economist Walter Pudschedl. According to Bank Austria’s forecast, the unemployment rate will rise to 6.4 percent this year and then return to 6.3 percent in the following year. The expected inflation rate for 2023 and 2024 is then given as 6.5 and 3.0 percent.
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