Cyclical Stabilisation, But No Robust Upturn. Economic Outlook for 2010 and 2011

In 2009, the Austrian economy contracted by 3.4 percent in volume. Goods exports, manufacturing output and investment in business equipment fell particularly strongly, while private consumption proved resilient, edging up slightly. Driven by the expansionary monetary and fiscal policy stance adopted worldwide, the downward trend of activity turned around as of mid-2009, with Austrian exports and industrial output picking up. The recovery is set to continue over the next few quarters, allowing real GDP to grow by 1.5 percent in 2010. However, the still low capacity utilisation will hardly provide incentives for higher investment in the short run. In a first outlook on 2011, real GDP growth is projected at 1.6 percent. The momentum of growth in 2010 and 2011 will be too weak to prevent unemployment from rising. According to national definitions, unemployment in 2011 will reach 8.1 percent of the dependent labour force, the highest rate since 1953. The general government balance will markedly deteriorate under the impact of automatic stabilisers, notably those affecting revenues, and the budgetary cost of the fiscal stimulus programmes. For 2010, a deficit amounting to 5.2 percent of GDP is expected.