The international economic downturn, which unfolded in the second half of 2022 and has also affected the Austrian economy, will continue to dampen GDP growth in the first half of 2023. Around the middle of the year, the economy is forecasted to regain momentum, both in the euro area and in Austria. For the year as a whole, WIFO expects weak real GDP growth of a mere 0.3 percent. In 2024 it is projected to accelerate to 1.8 percent. Due to the significant easing of prices on the energy markets, business and household sentiment has brightened somewhat. However, domestic tariffs for household energy and thus inflation will abate with some delay.

In recent years, the Austrian industrial production index has grown significantly faster than that of Germany. In Switzerland and Denmark, on the other hand, industry has expanded even more strongly than in Austria since the end of the COVID-19 crisis. However, the higher momentum in these countries is due to the boom in the pharmaceutical sector. Without this industry, the growth advantage dissipates. For all observed countries, the share of value added in output of the industry as a whole, remained rather constant recently. Therefore, meaningful comparisons can be made based on output data. Calculations of productivity based on hours worked reveal a similar development to the one of output. While a decline has been observed in Germany since 2017, labour productivity has increased in the other countries. The increase in Denmark and Switzerland was even more pronounced than in Austria. Here, too, the difference can be attributed solely to the pharmaceutical industry. Without it, there is no difference in labour productivity as compared to Austria.

The Executive Opinion Survey (EOS) is an international management survey conducted by the World Economic Forum to assess the quality of business locations. In Austria, WIFO organises and supervises the survey as the national partner organisation. This article summarises selected results for Austria and compares them with the average values of three groups of countries that are particularly relevant as peers for Austria. This year's focus in the present article is on managers' trust in public institutions. Special attention is paid to subjective perceptions of corruption. Overall, it shows that Austria is still an attractive business location but it has lost ground in terms of corruption and trust in politics and the judiciary.

The results of the WIFO-Konjunkturtest (business cycle survey) in January show a slight improvement in economic assessments compared with the previous quarter. However, economic expectations remained subdued in all sectors. Capacity utilisation stayed at an average level. In the aggregate economy, as in the previous quarters, the "shortage of labour force" was the most important obstacle to business activity, with "insufficient demand" continuing to gain slightly in importance. Although business uncertainty has decreased, it is still high and reflects considerable economic risks. Despite declines, sale price expectations also remained above average.

The WIFO radar of competitiveness measures the performance of Austria using 24 selected indicators related to economic, social and ecological goals: on average across 24 indicators, Austria is just behind the top third of European countries and has recently fallen further behind. This was partly due to a drop in the rankings for multifactor productivity and the indicators for employment and income distribution. Austria continues to achieve very high scores in regional cohesion. In other areas, such as energy dependency and environmental patents, it has improved relative to the other countries.

The international economic downturn also affected the Austrian economy in the second half of 2022. GDP is expected to decline in the winter half-year. Stimulus from foreign trade is expected to revive in spring 2023. The gradual easing on the energy markets is dampening inflation and should contribute to an improvement in sentiment over time and a pick-up in economic activity. In 2022, Austria's economic output will grow by 4.7 percent. In 2023, GDP is expected to largely stagnate (+0.3 percent), while in 2024 growth will increase to 1.8 percent.

The results of the WIFO-Konjunkturtest (business cycle survey) of October show a quarter-on-quarter weakening of economic assessments and a further deterioration of economic expectations for all sectors. Capacity utilisation also declined in all sectors, but still remained at average levels. As in previous quarters, the "shortage of labour force" was the most important constraint on business activity in the Austrian economy, although the "insufficient demand" is gaining in importance. Business uncertainty has risen for the last months. Sales price expectations has also remained above average.

After the strong expansion in the first half of 2022, the Austrian economy is now in a downturn phase. The economic slowdown is spreading to all value adding sectors; the manufacturing sector is even likely to slip into recession. Real GDP is expected to grow by 4.8 percent in 2022 and roughly stagnate in the following year (2023 +0.2 percent). With inflation remaining high in 2023, Austria's economy is heading for stagflation for the first time since the 1970s.

In 2021, there is a significant decrease in unit labour costs in manufacturing of 5.4 percent compared to the previous year. In an international comparison, Austria's unit labour cost position improved in 2021 compared with the weighted average of all trading partners (–2.6 percentage points) and compared with EU trading partners (–2.7 percentage points). Moreover, the unit labour cost position has also improved significantly compared with Germany, the most important trading partner (–2.5 percentage points). Due to the differences between Austria and its main trading partners in the implementation and design of COVID-19 aid, measures (especially short-time work) as well as the details of the statistical recording of these measures in the national accounts, this year's values should still be interpreted with caution, both over time and between individual countries.

In 2021, the agricultural policy course was set anew within the framework of the Common Agricultural Policy (CAP). In December 2021, the national CAP strategic plan was submitted to the European Commission. It sets out the measures to be taken in the coming years to make the agricultural sector more climate and environmentally friendly, more competitive and more attractive for employees. The new plan is also intended to stimulate the economic revival of rural regions and to improve food security. In 2021, the economic conditions for agriculture and forestry were favourable. This was reflected in higher prices for goods produced in the primary sector and an increase in factor income in agriculture. The sector also benefitted from payments to mitigate economic losses related to the COVID-19 crisis.