VIENNA, AUSTRIA / RankWire.AI / – Austria’s Oesterreichische Nationalbank has downgraded its forecast for the country’s economic expansion in 2026, citing subdued activity in the year’s first half. The central bank now anticipates that real gross domestic product will grow by 0.5% this year, a slight decrease from its June estimate of 0.6%. The bank explained that this 0.1 percentage point cut reflects weaker economic results during the initial six months of 2026 than previously reported.
According to Statistics Austria, Austria’s economy shrank by 0.1% in the second quarter compared to the previous three months. This decline broke a streak of six consecutive quarters of positive growth. Despite this, GDP was still 0.4% higher than in the same period last year, contrasting with an 0.8% year-on-year increase in the first quarter. Statistics Austria attributed the second-quarter slowdown to rising energy prices, which dampened economic output and added pressure to an economy that had recently emerged from recession.
The OeNB remains optimistic about the second half of 2026, despite the downward revision for the entire year. Its short-term indicator suggests GDP growth of 0.1% in the third quarter and 0.3% in the fourth. The bank highlighted improved global trade performance compared to earlier expectations, alongside increased momentum in Austrian exports. Additionally, industrial order books and business confidence have shown signs of recovery since the bank’s June forecast.
2027 Growth Outlook Elevated
The improved outlook for the latter half of 2026 has led the central bank to raise its forecast for Austria’s economic growth in 2027. The OeNB now predicts a growth rate of 1.3%, up from the 1.1% projected in June. Its estimate for 2028 remains unchanged at 1.2%. Austria experienced a 0.7% increase in economic activity in 2025 after two years of recession, yet the recovery has stayed modest amid higher energy costs and challenging global conditions.
The bank also factored in the economic impact of Austria’s summer drought into its latest assessment, estimating it will reduce growth by approximately 0.1 percentage point in 2026. OeNB Governor Martin Kocher noted that despite difficult circumstances, industrial orders and sentiment have improved since June. The bank indicated that these developments, together with stronger international trade, have contributed to a more positive outlook for the second half of 2026 and the upward revision for 2027.
Inflation Forecast for 2026 Adjusted Lower
The OeNB also lowered its inflation projection for Austria. It now expects the Harmonised Index of Consumer Prices to average 3.0% in 2026, down from its June estimate of 3.2%. The forecast for 2027 stands at 2.3%, with 2.2% projected for 2028. Earlier projections had indicated inflation rates of 2.4% for 2027 and 2.1% for 2028. The latest figures suggest inflation is on a downward trend following elevated energy prices during 2026.
The September forecast presents a modest growth outlook for Austria this year, with a quicker expansion expected in 2027. The 2026 growth projection of 0.5% aligns with the central bank’s forecast from March. The June update had increased that estimate to 0.6%, but weaker data from the first half prompted the latest downward revision. The OeNB’s updated forecasts for 2026 through 2028 incorporate recent economic data, international conditions, and its latest short-term outlook.