Cyclical Upturn, with Structural Problems Persisting. Medium-term Projections for the Austrian Economy until 2006

The Austrian economy is about to enter a phase of cyclical upturn that should last until 2004, when growth may rise above 3 percent. For 2005 and 2006, a marked slowdown should be expected. The business cycle is determined primarily by international developments exerting a direct impact on exports and investment in machinery and equipment. The further course of the world economy also holds the major risks to the projections. Domestic demand, while initially lagging behind the growth of output, will lend increasing support to overall activity towards the forecast horizon. Employment will post sizeable gains as the recovery proceeds, although a fall in unemployment may be held back by the ample supply of foreign labour. Financial scope in government households will remain tight, as policy is facing major challenges in shaping budgetary structures and in the areas of education and innovation.