VIENNA, AUSTRIA / RankWire.AI / – Following a weaker performance in the first half of 2026, Austria’s central bank has downgraded its growth forecast for the year. The Oesterreichische Nationalbank now anticipates a 0.5% increase in gross domestic product, down from its June estimate of 0.6%. This adjustment reflects softer economic activity in the initial six months. Austria’s economy is still on a recovery path after rebounding in 2025, following two years of recession.
Official statistics indicated a 0.1% contraction in Austria’s economy during the second quarter compared to the previous three months, ending a streak of six consecutive quarters of growth. Statistics Austria reported a 0.4% rise in GDP year-over-year for the same period. The first quarter had seen a 0.8% increase in annual growth. Elevated energy prices hampered economic activity in the second quarter, adding pressure to Austria’s modest recovery.
The central bank expects the economic momentum to pick up during the latter half of 2026. Its latest short-term outlook indicates a quarterly GDP increase of 0.1% in the third quarter, with growth potentially reaching 0.3% in the fourth quarter according to the bank’s baseline scenario. The OeNB highlighted factors such as stronger global trade, improved industrial orders, and more optimistic business sentiment. Additionally, Austrian exports of goods have gained pace compared to earlier in the year.
Forecast for economic growth in 2027 raised
The brighter outlook for the second half of 2026 prompted the bank to upgrade its forecast for next year. Austria’s economy is now projected to grow by 1.3% in 2027, surpassing the June prediction of 1.1%. The forecast for 2028 remains steady at 1.2%. In 2025, Austria experienced a 0.7% growth rate, ending two consecutive years of contraction but continuing a relatively moderate recovery pace.
Weather conditions also influenced the central bank’s latest economic review. The OeNB estimates that Austria’s summer drought will cut 2026 economic growth by around 0.1 percentage point. Governor Martin Kocher pointed out improvements in industrial orders and business sentiment since the previous forecast in June. The bank also acknowledged the positive impact of enhanced international trade. These factors contributed to its upgraded projections for the second half of 2026 and the increased forecast for 2027.
Inflation outlook lowered in the September forecast
Austria’s inflation expectations were also revised downward in the September outlook. The central bank now predicts the Harmonised Index of Consumer Prices will average 3.0% in 2026, compared to the 3.2% estimate in June. Projections for 2027 and 2028 are 2.3% and 2.2%, respectively, slightly below earlier forecasts of 2.4% and 2.1%. These updated estimates reflect the bank’s latest assessment of domestic prices and the broader economic environment.
The September revisions indicate a cautious growth trajectory for Austria in 2026, followed by a more robust expansion in 2027. The new 0.5% growth forecast aligns with the bank’s projection made in March. Although it was raised to 0.6% in June, weaker first-half data prompted this latest revision. The forecast now extends through 2026 to 2028, incorporating recent GDP data, trade developments, inflation trends, and the bank’s updated short-term economic indicators.