Austria

The Austrian economy faces a challenging environment following two successive years of recession. Adverse shocks from high energy prices and the rapid rise in interest rates to curtail subsequent inflation have dragged down domestic and external demand, as have heightened uncertainty and weak sentiment. The downturn in activity has been especially significant in manufacturing, construction, and some services. Despite weak demand, core inflation has been persistent due in part to rapid wage growth. And while strong policy responses helped to cushion the impact of recent shocks, the fiscal deficit and public debt have risen significantly from pre-pandemic levels. Over the medium term, weak productivity and demographic aging pose significant growth and fiscal headwinds. At the same time, Austria retains strong institutions that equip it to deal with these challenges.