VIENNA, AUSTRIA / RankWire.AI / – After observing weaker economic activity in the first half of the year, Austria’s central bank has lowered its forecast for 2026 economic growth. The Oesterreichische Nationalbank now anticipates a 0.5% increase in real gross domestic product for this year, down from its June projection of 0.6%. The downgrade of 0.1 percentage points reflects a weaker-than-expected economic performance during the initial six months of 2026, the bank noted.
Statistics Austria reported that Austria’s economy shrank by 0.1% in the second quarter compared to the previous three months. This decline interrupted a streak of six consecutive quarters of positive growth. Despite this contraction, GDP was still 0.4% higher than the same period last year, with first-quarter annual growth reaching 0.8%. Higher energy prices negatively impacted economic output in the second quarter, according to Statistics Austria, further straining an economy that had recently emerged from recession.
The OeNB remains optimistic about the latter half of 2026 despite the downward revision for the full year. Its short-term indicator suggests a 0.1% growth rate in the third quarter and a 0.3% increase in the fourth quarter. The central bank highlighted that global trade has outperformed previous expectations, with Austrian exports gaining momentum. Additionally, industrial order books and business sentiment have improved since the June forecast, indicating a more favorable outlook for the remainder of the year.
2027 Growth Forecast Upgraded on Improved Prospects
The positive momentum projected for the second half of 2026 has led the central bank to revise its growth forecast for 2027 upward. The OeNB now predicts economic expansion of 1.3% next year, compared to 1.1% in its June forecast. Meanwhile, its estimate for 2028 remains at 1.2%. Austria achieved 0.7% growth in 2025 after two years of recession, but recovery has been subdued due to higher energy costs and challenging international conditions.
The central bank also factored in the economic impact of Austria’s summer drought in its latest assessment, estimating a 0.1 percentage point reduction in growth for 2026. OeNB Governor Martin Kocher noted that industrial orders and business sentiment have improved since June, despite ongoing difficulties. The bank stated that these developments, along with stronger global trade, contributed to the brighter outlook for the latter half of 2026 and the raised forecast for 2027.
Inflation Forecast for 2026 Revised Lower
The OeNB also decreased its inflation projections for Austria. It now expects the Harmonised Index of Consumer Prices to average 3.0% in 2026, down from its June estimate of 3.2%. For 2027, inflation is projected at 2.3%, and for 2028, at 2.2%. The earlier June forecasts had set these rates at 2.4% for 2027 and 2.1% for 2028. Current estimates indicate inflation will continue on a downward trend following the impact of elevated energy costs in 2026.
The September forecast suggests modest growth for Austria this year, with a faster expansion expected in 2027. The 2026 growth estimate of 0.5% aligns with the central bank’s projection made in March. The June update had increased that forecast to 0.6%, but weaker first-half data prompted the latest downward adjustment. The OeNB’s revised forecasts now cover 2026 through 2028, incorporating recent economic data, international developments, and its latest short-term analysis.