| editorial staff
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15.12.2022
According to the current UniCredit Bank Austria economic indicator, the pace of the downturn will stabilize.
The deterioration in economic sentiment in Austria that began with the war in Ukraine was halted shortly before the end of the year.
“The UniCredit Bank Austria economic indicator reached minus 2.9 points in November, the same value as in the previous month. The pace of the downturn in the Austrian economy has not increased any further. However, the indicator allows for a slight decline for the last quarter of 2022 of GDP. At 0.2 percent compared to the previous quarter, economic growth in the third quarter was already low,” says UniCredit Bank Austria chief economist Stefan Bruckbauer.
Against this background, the Austrian economy is likely to have entered a slight recession.
“The global environment has weakened significantly and is causing domestic industry to slow down. With a little delay, the construction industry and the service sector are also likely to lose their growth course and follow industry into recession,” says Bruckbauer, adding: “We assume that only a slight decline in economic development has to be expected over the winter and the latest data even increase the hope that Austria could narrowly avoid a recession”.
Services counteract this
The different development trends in the individual economic sectors continued in November. Above all, the global export environment has deteriorated. Improvements can be seen in Asia, but the ongoing downturn in industry in Eastern Europe and in some Western European countries is having a negative impact on Austrian industry.
“The UniCredit Bank Austria economic indicator stabilized in November, but it is as low as it was more than two years ago. The renewed deterioration in industrial sentiment as a result of the unfavorable global environment was intensified by the onset of the economic slowdown in construction, but there was a slight relaxation The situation in the service sector compensated for the slowdown in the production sectors,” says UniCredit Bank Austria economist Walter Pudschedl and adds: “For the first time since 2005, however, the economic assessment in all economic sectors in Austria is worse than the euro area average. The mood in Austria seems particularly positive among consumers to be significantly worse than the actual situation”.
Outlook for 2023
The high inflation and the global economic slowdown should have a negative impact on development at the beginning of 2023, but the economic consequences for the domestic economy should remain manageable, according to the indicator from UniCredit Bank Austria.
Due to the measures taken by the state to contain inflation, such as the electricity price brake, changes in wage and income taxation and the valorisation of social benefits, the loss of purchasing power of Austrian consumers should be kept within limits.
recovery in sight
With inflation slowing, supported by developments in the euro area, the domestic economy should begin to recover from the spring.
“After economic growth of almost five percent in 2022, stagnation with GDP growth of 0.3 percent can only be expected for 2023 due to the weak start to the year. The pace of expansion will remain below average into 2024. The weak global recovery, the declining resilience of the labor market and the change in financing conditions, especially in residential construction. We expect economic growth of only 1.2 percent for 2024,” says Pudschedl.
Crisis-proof labor market
The economic slowdown from the second half of the year led to a slight increase in unemployment in Austria. In November, the seasonally adjusted unemployment rate was 6.4 percent, after 6.2 percent over the summer. Any further increase during the winter recession should be manageable, especially as the number of job vacancies has remained consistently above 120,000 since the start of the year. Accordingly, only two job seekers face an open position on average.
“After the drop in the unemployment rate in 2022 to an average of 6.4 percent, we expect stabilization at 6.4 percent for 2023 and a slight decline to 6.3 percent for 2024,” says Pudschedl.
Inflation weakens only slowly in 2023
With a slight decline to 10.6 percent due to the easing in crude oil prices, the upward trend in inflation that had been ongoing since the beginning of 2021 was interrupted for the first time in November. The electricity price brake should ensure further containment of inflation. Nevertheless, an annual average inflation of 8.5 percent can be expected in Austria in 2022.
After continued double-digit inflation figures at the beginning of the year, the ongoing easing in the prices for energy commodities should allow inflation to continue to slow down. However, inflation will only decrease very slowly. Fiscal measures to support purchasing power and the two-round effects of increased energy costs and relatively high wage agreements would continue to ensure high inflation rates.
“Only in the last third of 2023 is a noticeable relaxation to be expected on the basis of a dampening effect of the prices for (energy) raw materials, lessening supply disruptions and lower demand Only in the second half of 2024 should inflation be around 2 percent and thus return to the target range of the central banks,” Pudschedl expects.
In Austria, annual average inflation is likely to be 6.5 percent in 2023 and three percent in 2024.