VIENNA, December 20, 2025: Austria’s economy has entered a phase of measured recovery following a prolonged recession, according to updated projections by the country’s leading economic research institutes. The forecasts indicate that growth will strengthen steadily through 2027 as inflation eases and employment conditions improve. The Austrian Institute of Economic Research (WIFO) and the Institute for Advanced Studies (IHS) report that Austria’s gross domestic product is expected to rise by 0.5 percent in 2025. This marks a turning point after consecutive quarters of weak activity that weighed heavily on domestic demand and industrial output.
Both institutions expect momentum to improve further in 2026, with forecasts pointing to GDP growth of up to 1.2 percent as key sectors stabilize and investment gradually increases. For 2027, the projections remain cautiously optimistic. WIFO estimates growth at 1.4 percent, while IHS forecasts 1.1 percent. Economists attribute the gradual upturn to improving business sentiment, stronger private consumption, and steady export performance. Industrial production, which contracted in 2024, has begun to recover, supported by stable supply chains and renewed demand from European trading partners. Inflationary pressures, a major concern across Europe over the past two years, are expected to decline in Austria.
Both WIFO and IHS forecast that consumer prices will rise at an average annual rate of 3.6 percent in 2025, moderating to 2.5 percent in 2026. By 2027, inflation is projected to ease further to 1.9 percent, moving closer to levels consistent with broader eurozone stability. The decline in inflation reflects easing energy costs, improved supply conditions, and cautious wage growth across major industries. The labor market outlook has also improved in line with the economic recovery. The national unemployment rate, estimated at 7.4 percent for 2025, is expected to fall to 7.3 percent in 2026 and 7.1 percent in 2027.
Inflation rates show consistent downward movement
The recovery in employment is supported by hiring in construction, tourism, manufacturing, and technology. These sectors, which were among the hardest hit during the downturn, have shown measurable progress in recent months, driven by higher output and modest gains in productivity. The forecasts also indicate steady progress in restoring domestic demand. Household spending, which had weakened amid rising living costs, is showing early signs of improvement as inflation slows. Business investment has stabilized after several quarters of decline, reflecting a gradual return of confidence among small and medium-sized enterprises.
Export performance is projected to remain steady, supported by stronger demand in key markets such as Germany, Italy, and Switzerland. Public finances have also benefitted from the economic turnaround. Tax revenues are recovering in line with rising consumption and business activity, while government spending remains focused on infrastructure modernization and energy transition projects. The Austrian government continues to prioritize fiscal stability while supporting programs aimed at enhancing competitiveness and innovation in key industries. Austria’s economic performance is in line with broader trends observed across the European Union, where growth is slowly resuming following a period of stagnation. The easing of inflation and the normalization of supply chains have contributed to a more stable macroeconomic environment.
Austria’s fiscal health improves with stable policies
While growth remains moderate, the data suggests that Austria has entered a sustainable recovery phase marked by balanced progress in production, employment, and consumer confidence. WIFO and IHS emphasize that the latest figures represent a continuation of Austria’s gradual adjustment after two challenging years of economic strain. The improvements in growth, inflation, and employment confirm that the economy is stabilizing on a solid footing. As output strengthens and inflation continues to fall, Austria’s short-term outlook points to a period of steady recovery anchored by resilient domestic demand and sustained industrial recovery. The updated projections reflect Austria’s emergence from recession with a more stable economic base and moderate but consistent growth prospects extending through 2027. – By EuroWire News Desk.