VIENNA, AUSTRIA / RankWire.AI / – Austria’s central bank has lowered its projection for 2026 economic expansion following weaker activity observed during the first half of the year. The Oesterreichische Nationalbank now anticipates a real gross domestic product growth of 0.5% for this year. This is a downward revision from its June forecast of 0.6%. The bank explained that the 0.1 percentage point cut reflects a weaker economic performance than previously reported during the first six months of 2026.
According to Statistics Austria, Austria’s economy shrank by 0.1% in the second quarter compared to the previous three months. This decline interrupted a streak of six consecutive quarters of positive growth. Despite this contraction, GDP was still 0.4% higher than a year earlier, contrasting with the 0.8% annual growth seen in the first quarter. Statistics Austria attributed the slowdown to rising energy prices, which impacted economic output during the second quarter and added pressure to an economy that had recently come out of recession.
The OeNB remains optimistic about the second half of 2026, despite revising its full-year forecast downward. Its short-term indicator now projects GDP growth of 0.1% for the third quarter and 0.3% for the fourth. The central bank highlighted that global trade has performed better than initially expected, and Austrian exports have gained further momentum. Additionally, industrial order books and business sentiment have improved since the bank released its previous forecast in June.
Improved Growth Outlook for 2027
This more optimistic outlook for the latter half of 2026 has led the central bank to upgrade its forecast for 2027. The OeNB now projects a 1.3% growth rate for next year, compared to 1.1% in its June estimate. The forecast for 2028 remains unchanged at 1.2%. Austria experienced a 0.7% growth in 2025 after two years of recession, but the recovery has been modest, affected by higher energy costs and challenging international conditions.
Furthermore, the bank incorporated the economic impact of Austria’s summer drought into its latest analysis. It estimates that the drought will reduce economic growth by approximately 0.1 percentage point in 2026. OeNB Governor Martin Kocher noted that despite challenging conditions, industrial orders and sentiment have improved since June. The bank explained that these developments, along with stronger global trade, contributed to a more favorable outlook for the second half of 2026 and the upward revision for 2027.
Inflation Expectations Adjusted Lower for 2026
The OeNB also revised down its inflation forecast for Austria. It now expects Harmonised Index of Consumer Prices inflation to average 3.0% in 2026, down from its June estimate of 3.2%. The central bank’s projections for 2027 and 2028 are 2.3% and 2.2%, respectively. The earlier June forecasts had placed these rates at 2.4% for 2027 and 2.1% for 2028. The latest data indicates a declining trend in inflation, as elevated energy costs impacted prices during 2026.
Austria’s growth outlook for 2026 remains modest at 0.5%, with a more positive trajectory expected for 2027. The revised 2026 forecast aligns with the March projection, which had been raised to 0.6% in June before weaker first-half data prompted this adjustment. The OeNB’s updated forecasts, covering 2026 through 2028, incorporate recent economic data, international circumstances, and its latest short-term assessments.