Austria Outlook | Economy stagnates in 2024, inflation further declines
CEE Macro Outlook , 13. Sep.
After a recession in 2023, the Austrian economy has not shown signs of recovery in 1H2024. Private consumption and fixed gross capital formation are well below their levels of last year. Therefore, we expect the Austrian economy to stagnate in 2024. Inflation is further declining. This is partly due to price-dampening energy prices, but also to moderately rising food prices. However, inflation in the services sector, supported by wage increases, is likely to keep core inflation on an elevated level and in turn overall inflation is expected to remain above the eurozone average this year.
At the September meeting, the ECB Governing Council lowered the key interest rate by 25 basis points. The outlook shows the ECB does expect inflation to fall in line with their forecasts, allowing further rate cuts at their next meetings. Yields on German government bonds have risen since the beginning of the year. Yields on 10-year Austrian government bonds followed this development. We expect the risk premium compared to German government bonds to fall in the next months, partly due to positive rating reports.
At the September meeting, the ECB Governing Council lowered the key interest rate by 25 basis points. The outlook shows the ECB does expect inflation to fall in line with their forecasts, allowing further rate cuts at their next meetings. Yields on German government bonds have risen since the beginning of the year. Yields on 10-year Austrian government bonds followed this development. We expect the risk premium compared to German government bonds to fall in the next months, partly due to positive rating reports.