OECD sharply lowers Austria's growth forecast for 2026

The OECD names increased energy prices, which are in turn a consequence of the Iran war, as the main reason for the downwardly revised forecast. A longer-than-expected disruption of energy markets could significantly slow growth, the organization warns in its report. The economic consequences of the Middle East conflict are therefore likely to be felt long after the hostilities end. The OECD assesses the situation as a test of the resilience of the global economy.

Inflation, labor market, and budget deficit

Inflation in Austria remains significantly elevated at 2.8 percent in the current year, according to the OECD, but is expected to fall to 2.4 percent in 2027 as pressure on commodity prices eases. Government measures to limit the increase in fuel prices will cushion overall inflation, the report states. The unemployment rate is expected to remain largely stable at around 5.7 percent.

Despite consolidation measures introduced in 2025, the OECD forecasts an average budget deficit of 4.1 percent of gross domestic product for Austria in the period 2026 and 2027. According to OECD data, the federal government plans fiscal tightening totaling 0.4 percent of GDP by 2027. However, the reduction in mineral oil tax in 2026 and economic performance below expectations are likely to reduce tax revenues.

Recommendations for long-term strategies

Private consumption in Austria is expected to weaken over the course of 2026, according to the OECD's assessment. The energy shock and increased uncertainty due to the Middle East conflict are dampening the propensity to consume, while investments – particularly in artificial intelligence – are supporting the economy. The OECD expects growth of around 2 percent for the USA this year, which is expected to slow to 1.8 percent in 2027.

In the long term, the OECD recommends that Austria develop strategies to manage the financial burdens of an aging population, climate change, and defense. The expansion of renewable energies is a central pillar in this regard. The prerequisite for this is a comprehensive modernization, expansion, and digitalization of the electricity grid. Furthermore, the Republic should reduce administrative hurdles to accelerate the construction of large infrastructure projects.

The OECD also points out that China, with its high energy consumption and import dependence, is vulnerable to global oil price increases, but the increasing use of renewable energies and large reserves would mitigate these effects. Overall, the global outlook remains characterized by broad uncertainty, which is also likely to affect the domestic economy in the coming months.