Austrian National Bank Governor Predicts "Slightly Positive Impact" from VAT Reduction on Food

"Maßnahmen in die Gegenrichtung" (measures in the opposite direction), including increased bakery taxes and higher administrative fees, could partially negate the benefits, Kocher explained. He emphasized that the reduction alone cannot fully counteract "importierten Inflation über die Energiepreise" (imported inflation via energy prices).

Inflation and Economic Outlook

Austria’s inflation rate currently averages around 3%, but Kocher warned that prolonged geopolitical tensions—particularly the blockade of the Strait of Hormuz—could push it higher. "Niemand kann voraussagen, was da passiert" (No one can predict what will happen), he said, referencing the ongoing conflict between the U.S. and Iran.

The European Central Bank (ECB) aims to maintain 2% inflation as its benchmark for price stability. However, Kocher cautioned that if the Strait of Hormuz remains blocked, the ECB may have no choice but to raise interest rates on June 11. "Dann führt an Zinserhöhungen kein Weg vorbei" (Then there’s no way around raising interest rates), he stated.

Budgetary Challenges

Kocher acknowledged the difficulty of budget consolidation amid external shocks like the war in Iran and rising energy costs. "Es ist leichter, das Dach zu reparieren, wenn die Sonne scheint" (It’s easier to repair the roof when the sun is shining), he remarked, highlighting the challenges of fiscal adjustments during crises.

Structural cost increases in pensions and healthcare remain pressing issues. Kocher suggested targeted measures in these areas could help create "einen gewissen Spielraum über die Jahre zu schaffen" (some leeway over the years). However, he stressed that the government’s ability to mitigate broader economic impacts is limited.

Growth Prospects

Despite headwinds, Kocher expressed cautious optimism about Austria’s economic resilience. The National Bank recently revised its 2026 growth forecast down to 0.5%, which Kocher called "nicht überragend" (not outstanding) but achievable if geopolitical tensions ease.

He noted that the first quarter showed relative stability, with certain sectors less affected by energy price volatility. Still, Kocher warned that prolonged disruptions could further strain the economy, making growth targets harder to reach.