“The picture is bleak,” said Gabriel Felbermayr on Tuesday. The director of the economic research institute Wifo calculated that Austria’s real economic output per capita will not reach the 2019 value until 2030. This emerges from the Wifo medium-term forecast. Austria is threatened with a “lost decade”. In order to make up for what has been lost, a “broad reform partnership” between companies, unions and politicians is needed.
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Felbermayr and Holger Bonin, head of the Institute for Advanced Studies (IHS), yesterday also presented the classic autumn forecast for 2025 and 2026 with a positive core message: Austria’s economy will make it out of the longest recession since 1945 this year. After two years of contraction, Wifo expects 0.3 percent growth this year, the IHS expects a plus of 0.4 percent. The numbers have therefore been revised upwards. In June, economists had assumed zero growth or plus 0.1 percent.
The recovery will be driven by private consumption, while foreign trade in goods will initially shrink, said Felbermayr. Thanks to falling interest rates, residential construction investments are picking up earlier than equipment investments. Moderate wage agreements will dampen real wage growth in 2026, but will improve companies’ earnings situation. For next year, Wifo expects 1.1 percent growth, IHS 0.9 percent. According to Bonin, a recovery in industry and the construction sector should contribute to this.
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Figures 2023 and 2024 corrected
Wifo and IHS also pointed to a changed data basis as the reason for the forecast change. At the end of September, Statistics Austria corrected the domestic GDP data for 2023, 2024 and the first half of 2025 upwards. According to this, economic output did not shrink by a total of two percent in the previous two years, but by 1.5 percent.
But Bonin emphasized: “There is no reason to give the all-clear.” The economic growth now forecast will be lower than in previous upswing phases – due to a subdued international economy and domestic structural problems. Wifo also sees risks that the forecast may not hold. “The uncertainty is enormous; this can be measured by many indicators,” said Felbermayr. The downside risks include geopolitical conflicts, US tariff policy and public austerity measures.
Inflation will remain higher this year and next year than previously expected by Wifo and IHS. Both institutes expect inflation of 3.5 percent for the current year and 2.4 percent for 2026. IHS economist Helmut Hofer explained this by saying that food prices have risen sharply in recent months and the price increase for labor-intensive services has not abated. Felbermayr once again advocated halving the sales tax on food. According to the Wifo boss, it is incomprehensible that Finance Minister Markus Marterbauer rejects this for budgetary reasons – because in return the sales tax on other goods should be increased slightly. In the fight against inflation, Bonin advocated “resolving shortages” in energy, housing and labor, because these shortages would drive up prices. In addition to combating inflation, Felbermayr also sees a great need for action in industrial policy.
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Industry has a 15 percent share
Industry has lost around ten percent of real value creation since 2022, and the industrial share of gross domestic product has fallen by two percentage points to 15 percent since 2019. “There is a structural change underway in Austrian industry that will only intensify,” said Wifo economist Josef Baumgartner. Felbermayr referred to the turbulent international environment with trade conflicts that affect an export-oriented economy like Austria.
Felbermayr and Bonin praised Metaller’s rapid closing below the inflation rate as a sign that the country and the location were being placed at the center.
Source: Nachrichten
