Wifo: Austria's Economy Stagnates in the Second Quarter

Background: Energy as a Drag Factor

The economy was already weak in the previous quarter. After the economy had only grown slightly in the winter months, rising raw material costs have now caused growth momentum to falter completely. Economists had recently expected minimal growth; the zero on GDP came as a surprise to many.

Wifo Director Gabriel Felbermayr pointed out that the Austrian economy is more dependent on energy imports than other European countries. As a result, the oil price shock has a disproportionate impact on inflation and the purchasing power of households. Rising prices have once again taken the bite out of real disposable income.

International Comparison

In international comparison, Austria thus lags behind the eurozone average. While Germany and Italy recorded minimal gains in the second quarter, the Alpine republic stagnated. Industrial production – traditionally an important pillar of Austria's export economy – suffered particularly from increased input costs.

The Wifo flash estimate is based on preliminary indicators such as order intake, industrial production, and foreign trade. A detailed GDP calculation follows at the end of the month. Until then, the stagnation is considered a preliminary but robust tendency.

Outlook and Economic Policy Responses

For the coming quarters, the institute is cautiously optimistic. Should the oil price normalize again and the Iran war de-escalate, the Austrian economy could regain momentum in the second half of 2026. At the same time, Wifo warns of a possible second stagnation phase if geopolitical risks persist.

The weak economic data is likely to also fuel the debate over fiscal policy measures. Chambers of commerce and the Federation of Austrian Industries are calling for relief on non-wage labor costs and targeted investment incentives to secure the competitiveness of domestic businesses. The federal government is therefore under growing pressure to act before budget negotiations begin in the autumn.