Strong economic rebound amid high uncertainty about impact of Omicron variant. Economic outlook for Austria from 2021 to 2024 (December 2021)

In the course of 2021, the Austrian economy recovered more strongly than expected from the sharp contraction recorded in 2020. With the onset of the fourth wave of COVID-19 infections, however, this rebound will slow down again in late 2021 and early 2022. GDP growth for 2021 as a whole will come to 4.9% and will only be affected slightly by the recent slowdown. In early 2022, growth will still be driven by the negative effects of the fourth wave on domestic tourism and by persistent global supply disruptions. Once these effects wear off, we expect the Austrian economy to recover quickly and expand by 4.3% in 2022. In 2023 and 2024, economic growth will decelerate to 2.6% and 1.8%, respectively. This means that in the first half of 2022, Austria’s economic output will reach pre-crisis levels and by the end of the forecast horizon, it will almost be back in line with its pre-crisis trend. The Austrian labor market recovered swiftly from the disruptions caused by the pandemic. In recent months, it actually recorded labor supply shortages. The unemployment rate as defined by Public Employment Service Austria (AMS) went down to 8.2% in 2021 after having risen to 10.1% in 2020. It is expected to decline to 6.0% by 2024. On the back of higher energy prices and global supply disruptions, HICP inflation increased to 2.7% in 2021. In 2022, it will climb further to 3.2%, spurred by energy price developments, the introduction of the CO2 tax as of July 1, 2022, and higher nonenergy commodity prices. With supply-side bottlenecks dissolving and energy prices subsiding, inflation will be down to 2.3% in 2023 and 2.0% in 2024. Thanks to the economic upturn, Austria’s budget deficit improved markedly in 2021, coming to 5.9% of GDP. For 2022, we expect it to decline further to 2.1% as the economy continues to recover and discretionary COVID-19-related measures will be discontinued. The eco-social tax reform will hardly impair Austria’s positive fiscal performance. Austria’s government debt ratio is expected to reach 75.5% in 2024, following a gradual decline from its historic high of 83.2% recorded in 2020.