OeNB forecast: inflation rate of 7.4 percent this year

The Oesterreichische Nationalbank (OeNB) expects an economic recovery in the second half of the year and thus slight economic growth for the year as a whole. Despite the decline, inflation will still be 7.4 percent.

Unemployment remains stable. According to forecasts, inflation should fall to 4.1% in 2024, the economy should grow by 1.6%, and real income should rise sharply by 3.3%.

According to the OeNB, the economy has been in the stagflation phase since the second half of 2022, i.e. zero growth with high inflation. “But in the second half of the year, the economy will pick up momentum again and inflation will slowly come down,” said OeNB Governor Robert Holzmann.

There is no risk of a recession in Austria for 2023 as a whole, that is, a contraction of the economy, and the OeNB expects an increase of 0.5 percent. However, based on the Harmonized Index of Consumer Prices (HICP), which is comparable across the European Union, prices will rise 7.4 percent. However, employees in Austria can expect a slight growth in their real income of 0.3%. The unemployment rate rose only slightly, to 6.4 percent.

2024 prospects

Since Austria’s collective bargaining negotiations include the previous year’s inflation in wage increases, lower inflation in 2024 will lead to “an extraordinarily strong increase in real wages and thus in private consumption,” according to the forecast. Real wages could rise by 3.3 percent.

Although inflation will drop to 4.1% in 2024, inflation in the services sector will only slowly decline. Therefore, core inflation (excluding energy and food) will be 5.1% in 2024, a percentage point above the HICP rate. Economic growth should pick up to 1.7 percent and unemployment should fall slightly again.