Strong Cyclical Upswing Leaves Budgetary Problems Unresolved. Economic Outlook for 2000 and 2001

Accelerated export growth and solid expansion of domestic demand suggest the Austrian economy will grow by 3.1 percent in volume this year – an upward correction by ¼ percentage point from last December's projections. In 2001, growth may decelerate somewhat (+2.7 percent) under the impact of slackening activity abroad and, more importantly, a stronger demand-restraining impact of domestic budgetary retrenchment. Fiscal policy action, while limiting government net borrowing at a ratio of 2 percent of GDP, will contribute to somewhat stronger inflation. The labour market will benefit from the favourable business cycle trend.