IHS: Austria continues to miss Maastricht target despite falling deficit ratio

Deficit procedure and government targets

The IHS notes that "zusätzliche Anstrengungen notwendig" are needed in order to reach the Maastricht target of 3 percent and exit the EU deficit procedure in which Austria currently finds itself. The government had wanted to reach "only" 3 percent new borrowing by 2028. Federal Chancellor Stocker has put forward a 2-1-0 formula for 2 percent inflation and 1 percent economic growth.

Stronger budget consolidation measures in Austria are likely to dampen growth, at least in the short term. Economic growth in Austria is forecast by the IHS to limp along at roughly one percent per year from this year until 2030. This applies in particular to the healthcare system and pensions.

Structural reforms as the key

The background is the demographically driven expenditure pressure, which is set to remain high beyond the forecast period. The IHS also emphasizes that its own medium-term forecast (until 2030), which it itself says is subject to considerable uncertainty, remains conditional on political and cyclical risks.

Possible growth impulses

At the same time, the Institute points to possible growth impulses. On the other hand, if consumer confidence improved, the savings ratio could fall more sharply and stronger consumer demand could boost growth. Increased business investment in the use of artificial intelligence could also raise productivity and improve the medium-term growth outlook.

According to the IHS, structural reforms are needed above all in the areas of healthcare and pensions in order to safeguard the long-term sustainability of public finances. The projected shortfall relative to the 3-percent threshold means that Austria is likely to remain in the EU deficit procedure at least until 2028, unless additional measures are taken.

The IHS forecast thus sets the framework for the federal government's upcoming budget negotiations. While Maastricht discipline is being demanded, the projections simultaneously highlight the limits of a pure austerity course, which could weigh on growth further in the short term.