Russia’s war of aggression against Ukraine continues to have a negative impact on the EU economy and therefore also on Austria. The EU Commission has revised its economic outlook downwards compared to the spring forecast and sees less growth and higher inflation in EU countries and also in Austria than in May. Accordingly, inflation in Germany is expected to average 7.4% in 2022 and only weaken to 4.4% in 2023.
In their latest forecast in May, Brussels officials still assumed Austrian inflation of 6.0% for 2022 and expected a decline to 3.0% in 2023. In fact, the ECB is targeting an inflation rate of 2% .
“Many of the downside risks associated with the spring forecast have materialized. Russia’s invasion of Ukraine has put additional upward pressure on energy and food commodity prices,” the commission wrote in its summer forecast on Thursday.
Eurozone revised up
For the euro area and the EU as a whole, the Commission revised its inflation forecast significantly upwards compared to the spring forecast. Inflation in the euro zone is expected to peak at 8.4% year-on-year in the third quarter of 2022 and fall steadily thereafter, the agency expects. It should then drop below 3% by the last quarter of 2023.
GDP revised down
The prospects for growth in EU economies are as bad as the prospects for inflation. The EU Commission has also revised its expectations here and is now assuming a real increase in gross domestic product (GDP) in Austria at 3.7% for 2022. In May it was 3.9%. GDP is expected to increase by 1.5% for 2023, up from 1.9% last time. According to the forecast, growth will be supported by normalization in the service sector and tourism. The shortage of skilled workers in the labor market is worsening and slowing growth momentum.
The Austrian figures for last year 2021, on the other hand, have been revised upwards again – from 4.5% economic growth to 4.8%.
For the EU economy as a whole, the Commission is assuming a positive GDP of 2.7% this year and 1.5% in 2023. Growth of 2.6% is expected for the euro area in 2022, which will weaken to 1.4% in 2023.