Economic recovery aided by coronavirus vaccine rollout. Economic outlook for Austria from 2021 to 2023 (June 2021)

Christian Ragacs, Richard Sellner and Klaus Vondra ()
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Klaus Vondra: Oesterreichische Nationalbank, Economic Analysis Division

Monetary Policy & the Economy, 2021, issue Q2/21, 81-115

Abstract: The easing of containment measures in view of accelerated COVID-19 vaccination rates have put the Austrian economy back on the road to a strong recovery in mid-2021. In 2020, containment measures had caused real GDP to contract by 6.7% year on year. Looking ahead, the Oesterreichische Nationalbank (OeNB) expects annual GDP growth to bounce back to 3.9% in 2021 and 4.2% in 2022, and to return to a normal growth rate of 1.9% in 2023. Amid the catch-up process in 2021 and 2022, industrial production, goods exports and investment are projected to expand in Austria on account of strong global demand. The key drivers of global demand will be the US economy, which is being powered by massive fiscal stimuli, and the robust global industrial production cycle. Exports from Austria are forecast to increase by 7.1% in 2021, by 6.4% in 2022 and by 3.4% in 2023. Gross capital formation is expected to recover sharply in 2021 (+4.7%). Thereafter, investment growth should go down to 3.3% (2022) and 1.8% (2023) as the investment cycle slows down. Private consumption, which slumped by 9.4% in 2020, is projected to recover fast with 4% growth in 2021 and 5.8% in 2022. This means that private consumption will exceed pre-crisis levels already in the first half of 2022, before slowing down in 2023 (+1.8%). Consumption growth will be driven substantially by dissaving, as the saving ratio is forecast to drop from its peak of 14.4% in 2020 to below 8% in 2023. Amid the economic recovery, the unemployment rate is expected to fall to 4.6% in 2023, from 5.2% in 2021. HICP inflation is projected to rise to 2.0% in 2021, driven by rising commodity prices, and to decelerate to 1.8% in both 2022 and 2023. The general government deficit is projected to improve to 6.9% of GDP (following 8.9% in 2020) and to drop to around 2% of GDP by 2023. The debt ratio, which rose from 83.9% to 85.1% of GDP in 2021, is forecast to start shrinking from 2022 and to amount to close to 82% of GDP in 2023.

Date: 2021
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