The Organisation for Economic Cooperation and Development (OECD) forecasts Austria's GDP growth to recover to 0.2 percent in 2024 and 1.5 percent in 2025 as domestic demand improves, after the contraction of 0.7 percent last year, the latest OECD Economic Survey of Austria showed.

The fiscal deficit, as a share of GDP, has declined from its pandemic peak but remained relatively high at 2.6 percent in 2023 and is projected to remain stable into 2025, though without improving.

Inflation, which increased significantly following the surge in energy prices and has spread to core services, is expected to decline from 7.7 percent in 2023 to 3.7 percent in 2024 and 2.9 percent in 2025.

Continued reforms to boost productivity, improve social mobility and accelerate climate action would put the country on a stronger growth path and further improve living standards, the report added.

“Austria’s strong economy is set to recover from last year’s recession. Fiscal reforms, improving spending efficiency and pension sustainability, can help to boost the economy’s resilience to future shocks,” OECD Secretary-General Mathias Cormann said.

He added, “Rebuilding fiscal space, boosting productivity by reducing barriers to private sector investment and upgrading digital infrastructure, improving social mobility through enhanced opportunities for women, socio-economically disadvantaged children and migrants, and accelerating climate action by increasing carbon prices and decarbonising transport and energy supply will help drive resilient growth in Austria.”

Beyond short- and medium-term expenditure reductions, fiscal policy needs to address long-term spending pressures. Expenditures on pensions, health care and long-term care are expected to increase significantly over the next decades due to population ageing.

There is also potential to increase the efficiency of health care spending – for example by shifting health services away from hospital care and strengthening outpatient care. Shifting some labour taxation towards environmental taxes and towards recurrent taxation of immovable property would support sustainable growth.