Image: VOLKER WEIHBOLD
After Austria’s economy shrank by 0.7 percent in 2023 according to preliminary calculations by the Economic Research Institute (Wifo), the domestic industry is still in recession at the beginning of the year. This is what Wifo writes in its current economic report. According to preliminary calculations, the Austrian economy grew by 0.2 percent in the fourth quarter of 2023 compared to the previous quarter, resulting in a GDP decline of 0.7 percent for 2023 as a whole.
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Investment demand is being weighed down by high interest rates across Europe, with countries specializing in capital goods such as Germany, the Czech Republic and Austria particularly suffering, the report says. The tighter credit conditions will also significantly dampen demand for construction.
According to Wifo, the weak industrial economy is now also affecting the service sectors. In Austria, in addition to transport, business-related services and trade are affected. Only the tourism industry is currently developing vigorously, despite the significant increase in the price of hotel and restaurant services.
Rising unemployment
“The weak (international) economy is putting increasing strain on the domestic labor market,” writes the author of the current Wifo economic report, Marcus Scheiblecker. “The recession from mid-2022 led to a delayed trend reversal in the development of unemployment.” Unemployment is rising not only due to lower demand for labor due to the recession, but also due to immigration.
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The number of vacancies has decreased noticeably in the last few months. According to Wifo, the increase in employment, which had previously prevented a sharper increase in the unemployment rate, almost came to a standstill in January compared to the previous month.
According to a flash estimate, inflation fell to 4.5 percent in January – this is the lowest value since 2021, but still significantly higher than the euro area average.
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