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Business Cycle Recovery Gaining Shape. Economic Outlook for 2004 and 2005

  • Markus Marterbauer

    (WIFO)

Economic growth in Austria is set to accelerate to 1.7 percent in real terms in 2004 and 2.4 percent in 2005. The major incentives for the moderate recovery are coming from the revival of world trade. A vigorous economic upturn has come under way in the USA and in Asia; spill-over effects to Europe will, however, be dampened by the appreciation of the euro vis-à-vis the dollar. In Austria, several indicators point to a pick-up in merchandise exports and manufacturing output. Growth of private household spending is reverting only gradually to its long-term trend. Domestic demand is sustained primarily by lively activity in civil engineering and a rebound of residential building. The cyclical recovery will not lead to a turnaround on the labour market towards lower unemployment, because of a marked increase in foreign labour supply. The improvement in private incomes and employment will boost tax revenues and narrow the general government deficit. The present projections make no allowance for tax cuts envisaged for 2005, which would lead to higher GDP growth and a higher budget deficit than presented in the baseline scenario.

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Article provided by WIFO in its journal Quarterly.

Volume (Year): 9 (2004)
Issue (Month): 1 (January)
Pages: 1-13

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Handle: RePEc:wfo:wquart:y:2004:i:1:p:1-13
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