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Marked Slowdown of Growth in Europe Dampening Domestic Business Activity. Economic Outlook for 2001 and 2002

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  • Markus Marterbauer

    (WIFO)

Abstract

Economic growth in Austria in 2001 is projected at 1.7 percent, half the rate attained last year. The marked slowdown in the pace of activity mirrors the weakening of the European business cycle. With growth in the USA having virtually come to a halt, the upward trend of European exports has become much flatter. In addition, higher energy prices are eroding consumer purchasing power. The expansion of merchandise exports, manufacturing output, machinery and equipment investment and wholesale trade in Austria is being dampened to a significant extent. Construction output is also sluggish due to lack of demand. Private household consumption, however, is stabilising the business cycle, despite some decline in real disposable income. Inflation is proving more stubborn than assumed still a few months ago. Headline inflation could rise to 2.6 percent this year, before abating to 1.9 percent in 2002. Slower growth is clouding the outlook for the labour market. Unemployment is unlikely to fall further and may remain around a total of 190,000. Whether in 2002 the aimed-for balance in the general government account will actually be achieved, will not only depend on business cycle developments, but also on the recognition by Eurostat of fiscal operations whereby a number of public sector activities have been moved "off budget".

Suggested Citation

  • Markus Marterbauer, 2001. "Marked Slowdown of Growth in Europe Dampening Domestic Business Activity. Economic Outlook for 2001 and 2002," Austrian Economic Quarterly, WIFO, vol. 6(3), pages 102-111, July.
  • Handle: RePEc:wfo:wquart:y:2001:i:3:p:102-111
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