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The word pandemic was used more frequently than the word gross domestic product (GDP) in yesterday’s presentation of the economic forecast by economic researchers. Because containing the pandemic is currently the most important economic policy measure, said Christoph Badelt, director of the Wifo economic research institute. Together with Martin Kocher, director of the IHS, he presented a forecast for the coming years that is fraught with uncertainty more than ever.
The IHS expects GDP to fall 7.5 percent in 2020. According to the IHS, the economy should grow again starting next year: 3.1 percent (2021) and 3.8 percent (2022) . Wifo is more optimistic: After falling 7.3 percent this year, it expects 4.5 percent growth again next year. However, Wifo had calculated another scenario in the event of a third blockade. This assumption was confirmed during the online press conference: With lock number three, Wifo is assuming a growth of only 2.5 percent in 2021. The big difference is the lack of tourism, which this year alone contributed around 1.5 percentage points to the fall in GDP.
Savings rate at an all time high
At 14.2 percent, the savings rate among Austrians has risen to an all-time high this year. With relatively stable disposable income, this increase was at the expense of consumption, which fell 8.3 percent. “This is also incredibly high by historical comparison,” said IHS chief Kocher. Assume there will be recovery effects in the next year. The same can be expected for investments, although the investment premium has already saved quite a bit. The labor market remains the problem child: unemployment will remain well above nine percent in the next few years.
In the short term, the head of Wifo, Badelt, advocates continuing the “economic policy of the firemen”, that is, not stifling an economic rebound through premature savings. In the long term, however, Austria faces unpleasant budget policy decisions: a change in the direction of climate policy is necessary, priorities must be re-established. After a GDP-based budget surplus of 0.7 percent in 2019, Wifo and IHS expect a budget deficit of 10.1 and 10.7 percent this year. (South Dakota)
