Austria’s economy is weakening: OECD lowers GDP forecast

However, according to the organization, the forecasts should be viewed with caution. “A longer-than-expected disruption in energy markets could significantly slow growth,” the OECD stressed in its outlook published on Wednesday. For comparison: The domestic economic research institutes Wifo and IHS expect an increase of 0.9 and 0.5 percent respectively for 2026, the Oesterreichische Nationalbank (OeNB) expects 0.5 percent and the EU Commission expects 0.6 percent.

Below average

In an international comparison, Austria is well below average. The OECD countries will achieve GDP growth of 1.5 and 1.7 percent this year and next year, respectively. Global economic growth forecasts the OECD for 2026 with 2.8 percent and for 2027 with 3.1 percent. According to the OECD, the escalating conflict in the Middle East is fundamentally putting the resilience of the global economy to a “hard test”. Even after the conflict ends, the economic impact is likely to be felt for some time, the report says.

For the USA, the OECD predicts growth of around two percent for the current year, which will slow to 1.8 percent in 2027. While the energy shock and increased uncertainty due to the conflict in the Middle East are expected to dampen private consumption growth, underlying growth will continue to be supported by strong investment in artificial intelligence.

In the euro area, the OECD expects growth of 0.8 percent for the current year, rising again to 1.2 percent in 2027 as domestic demand and trade growth pick up. According to the OECD forecast, growth in China will slow to 4.5 percent in 2026 and to 4.3 percent in 2027. China’s high energy consumption and dependence on imports made the country vulnerable to global oil price increases, but increasing use of renewable energy and abundant reserves mitigated these impacts.

Budget deficit over 4 percent despite austerity measures

According to OECD calculations, annual inflation in Austria is expected to be 2.8 percent this year. “Government measures to limit the rise in fuel prices will cushion overall inflation,” the organization said. Since the pressure from raw material prices is expected to ease in 2027, the Inflation will fall to 2.4 percent. In addition, consumption is expected to slow down over the course of 2026. At the same time, the unemployment rate is likely to remain largely stable and level off at around 5.7 percent.

Despite the consolidation measures introduced in 2025, Austria’s budget deficit remains above 4 percent of GDP. According to OECD forecasts, the federal government will tighten its fiscal policy by a total of 0.4 percent of GDP by 2027. Nevertheless, the budget deficit is expected to average 4.1 percent of GDP in the period 2026 to 2027. The reduction in petroleum tax in 2026 and the below-expected economic performance will reduce tax revenues despite higher inflation, the report says.

However, Austria also needs long-term strategies in view of the financial burdens caused by the aging population, climate change and defense, emphasized the OECD. The expansion of renewable energies is central to this. In order to accelerate the construction of large-scale infrastructure, administrative hurdles would have to be reduced. At the same time, the expansion of electricity generation from renewable energies requires comprehensive modernization, expansion and digitalization of the electricity network.