VIENNA, AUSTRIA / RankWire.AI / – In Vienna, during 2026, the Oesterreichische Nationalbank has downgraded its expectation for Austria’s economic expansion this year, citing weaker activity observed in the first half. The bank now anticipates real gross domestic product to grow by 0.5% in 2026, a slight decrease from its June projection of 0.6%. The downgrade of 0.1 percentage points reflects the weaker economic performance reported in the initial six months of 2026.
According to Statistics Austria, Austria’s economy shrank by 0.1% in the second quarter compared to the previous three months. This decline follows six quarters of consecutive growth and, despite the contraction, GDP was still 0.4% higher than a year earlier. This is in contrast to the 0.8% annual growth seen in the first quarter. Statistics Austria explained that rising energy prices had a dampening effect on economic activity during the second quarter, adding pressure on an economy that had recently escaped recession.
Despite the overall downward revision for 2026, the OeNB remains optimistic about the latter half of the year. Its short-term indicator projects GDP growth of 0.1% in the third quarter and 0.3% in the fourth. The central bank highlighted that global trade has performed better than previously expected, with Austrian exports gaining momentum. Additionally, industrial order books and business confidence have improved since the June forecast, signaling positive momentum moving forward.
2027 Growth Forecast Elevated Due to Improved Prospects
The improved outlook for the second half of 2026 has prompted the central bank to increase its growth forecast for 2027. The OeNB now estimates the economy will expand by 1.3% next year, up from the 1.1% previously forecasted in June. Its projection for 2028 remains unchanged at 1.2%. Austria experienced a 0.7% growth in 2025 after two years of recession, but the recovery has remained modest amid higher energy prices and challenging international circumstances.
The central bank also factored in the economic impacts of Austria’s summer drought in its latest assessment, estimating a reduction of about 0.1 percentage points in growth for 2026 due to the drought. OeNB Governor Martin Kocher noted that despite challenging conditions, industrial orders and business sentiment have improved since June. The bank explained that these developments, combined with stronger global trade, have contributed to the better outlook for the latter half of 2026 and the upward revision for 2027.
Inflation Forecast for 2026 Reduced
The OeNB also lowered its inflation projections for Austria. It now expects the Harmonised Index of Consumer Prices to average 3.0% in 2026, down from the June estimate of 3.2%. The forecast for 2027 has been adjusted to 2.3%, and for 2028 to 2.2%, compared to previous estimates of 2.4% and 2.1%, respectively. The latest data suggests that inflation is on a downward trend after elevated energy costs pushed prices higher during 2026.
The September forecast indicates a modest growth rate for Austria this year, with a more accelerated expansion projected for 2027. The 2026 growth forecast of 0.5% aligns with the central bank’s estimate made in March. The June update had increased this to 0.6%, but weaker first-half data prompted the latest downward revision. The OeNB’s updated projections for 2026 through 2028 incorporate recent economic data, international developments, and its latest short-term assessments.