An International Monetary Fund (IMF) mission visited Austria from March 26 to April 8, 2025, to carry out discussions regarding Austria's 2025 Article IV consultation. Kevin Fletcher led the mission, accompanied by associates Adil Mohommad, Magali Pinat, and Mustafa Saiyid. During this visit, they released a statement emphasizing Austria's complex economic situation.
Austria's economy has faced challenges following two years of recession, and growth is projected to remain stagnant for 2025. Factors such as high energy prices and rising interest rates have dampened demand, while global economic uncertainty and needed fiscal changes present further challenges. Despite these obstacles, Austria benefits from strong institutions and policies. The IMF advises measures such as fiscal adjustments, economic reforms, and maintaining financial stability.
The Austrian economy has struggled with downturns since the end of 2022, worsened by monetary tightening and increased energy prices. Fiscal deficits and debts have spiked partly due to these economic pressures and policies meant to mitigate energy and COVID-related shocks. The future outlook includes fiscal consolidation and reforms aimed at boosting productivity through a more integrated EU Single Market.
Austria's GDP growth is expected to stay around zero in 2025 due to tight financial conditions and ongoing trade barriers. Although improvement is anticipated from 2026, underlying issues like population aging and productivity will continue to affect growth unless major reforms occur.
Significant fiscal consolidation is necessary over the medium term, with the deficit rising by 2.1% in 2024. The government aims to reduce this to under 2% of GDP in the medium term for debt stabilization. Maintaining sustainable public investment to meet climate goals will require further fiscal adjustments.
To address fiscal challenges, expenditure cuts paired with revenue enhancements are suggested. Options include adjusting public pension costs, healthcare efficiency, and increasing taxes on property and inheritance. Additionally, a carbon tax uplift could meet investment needs while reducing emissions in accordance with Austria's climate goals.
Structural reforms could enhance productivity by deepening the EU Single Market and streamlining domestic regulations to encourage business dynamics. The government is also urged to address labor supply constraints due to demographic changes and low participation rates, especially among women and senior citizens.
Austrian banks and insurers remain stable, but a cautious approach to credit risks is advised. The financial sector has experienced high profits recently, likely to taper as conditions normalize. Banks should prepare for these shifts by maintaining prudent financial practices.
The IMF mission concluded its visit, expressing thanks for the cooperative dialogue and hospitality extended throughout their stay in Austria.