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Cyclical Upturn, with Structural Problems Persisting. Medium-term Projections for the Austrian Economy until 2006

Author

Listed:
  • Josef Baumgartner
  • Serguei Kaniovski
  • Markus Marterbauer

    (WIFO)

Abstract

The business cycle recovery is currently proceeding at a slow pace. The medium-term forecast for the Austrian economy expects, however, an acceleration in 2003 and 2004. The upswing is mainly driven by external forces stimulating exports and business investment in machinery and equipment. Growth of domestic demand, initially lagging behind, will lend increasing support to overall activity towards the forecast horizon. Nevertheless, due to the assumed slowdown of the international business cycle, a marked deceleration of GDP growth should be expected for 2005 and 2006. Over the period 2001-2006, the Austrian economy is projected to expand at an annual rate of 2.3 percent in real terms, slightly below the EU average. Employment will post sizeable gains as the recovery proceeds, whereas the decline in unemployment may be held back by the ample supply of foreign labour. Inflation is set to remain subdued. General government finances are likely to move to a small surplus that should not, however, be taken as offering scope for a tax cut. Budgetary policy ought to make structural reform its major focus of attention.

Suggested Citation

  • Josef Baumgartner & Serguei Kaniovski & Markus Marterbauer, 2002. "Cyclical Upturn, with Structural Problems Persisting. Medium-term Projections for the Austrian Economy until 2006," Austrian Economic Quarterly, WIFO, vol. 7(3), pages 121-131, September.
    • Handle: RePEc:wfo:wquart:y:2002:i:3:p:121-131
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