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Sluggish Cyclical Recovery. Economic Outlook for 2010 and 2011

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  • Markus Marterbauer

    (WIFO)

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    Abstract

    While the cyclical downturn has come to a halt since mid-2009, the recovery is set to remain subdued. Goods exports and manufacturing output benefit from the rebound of world trade and the upswing in Asia as well as from the strengthening activity in trading partner countries in western Europe. However, these impulses have so far failed to trigger a new investment cycle, given the uncertain outlook and the substantial slack in productive capacities. Private consumption is on a steady but slow upward trend. In such an environment, the Austrian economy will grow by 1.3 percent in volume in 2010 and by 1.4 percent in 2011. The pick-up in production will not be strong enough to turn the labour market around; thus, by 2011, unemployment will rise to 7.7 percent of the dependent labour force or 5.4 percent of the total labour force according to Eurostat definitions. The latest budgetary decisions of the federal government suggest that the general government deficit will be taken down from its peak to around 4 percent of GDP. A crucial factor for a sustainable recovery will be whether the rebound in foreign demand will ignite domestic investment in machinery and equipment before dampening effects from synchronised fiscal consolidation across the EU set in.

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    Bibliographic Info

    Article provided by WIFO in its journal Quarterly.

    Volume (Year): 15 (2010)
    Issue (Month): 2 (May)
    Pages: 133-145

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    Handle: RePEc:wfo:wquart:y:2010:i:2:p:133-145

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