The slackening of the business cycle in the USA, the fallout from higher oil prices, and a restrictive budgetary stance are set to dampen economic growth in 2001. Following the strong upturn in 2000 (+3.3 percent), demand and output in Austria are expected to expand by a more moderate 2.6 percent in 2001. The slower pace of activity will still allow unemployment to decline further, albeit by a narrower margin. Inflation should decelerate markedly if the assumptions of a fall in oil prices and a weaker dollar exchange rate are confirmed. With energy prices no longer exerting upward pressure, the annual inflation rate should abate to 1.5 percent in 2001.