VIENNA, AUSTRIA / RankWire.AI / – After observing weaker activity during the first half of the year, Austria’s central bank has lowered its 2026 economic growth projection. The Oesterreichische Nationalbank now anticipates real gross domestic product will grow by 0.5% in 2026, compared to its June forecast of 0.6%. The bank stated that the 0.1 percentage point reduction is due to weaker economic performance reported during the first six months of 2026.
According to Statistics Austria, Austria’s economy contracted 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. Nonetheless, GDP was still 0.4% higher than the same period last year, although it was lower than the 0.8% annual increase seen in the first quarter. Statistics Austria attributed the slowdown to higher energy prices, which weighed on economic output during the second quarter and added pressure to an economy that had recently emerged from recession.
Despite the overall downgrade for the full year, the OeNB foresees more favorable conditions in the latter half of 2026. Its short-term indicator suggests GDP growth of 0.1% in the third quarter and 0.3% in the fourth. The bank highlighted that global trade has performed better than initially expected, and Austrian exports have gained momentum. Additionally, industrial order books and business sentiment have improved since the bank released its previous forecast in June.
2027 Growth Outlook Gets an Upgrade
The improved prospects for the second half of 2026 have led the central bank to raise its forecast for 2027. The OeNB now estimates economic growth of 1.3% next year, up from 1.1% in its June projection. The forecast for 2028 remains unchanged at 1.2%. Austria experienced a 0.7% growth in 2025 after two years of recession, but the pace of recovery has been muted due to higher energy costs and challenging international circumstances.
The central bank’s latest assessment also factors in the economic impact of Austria’s summer drought. It estimates that the drought will reduce growth by about 0.1 percentage point in 2026. OeNB Governor Martin Kocher noted that, despite difficult conditions, industrial orders and sentiment have improved since June. The bank added that these positive developments, along with stronger global trade, have contributed to the brighter outlook for the latter half of 2026 and the higher forecast for 2027.
Inflation Forecast for 2026 Reduced
The OeNB has also lowered its inflation expectations for Austria. It now projects Harmonised Index of Consumer Prices inflation to average 3.0% in 2026, down from the June estimate of 3.2%. For 2027, the bank forecasts inflation of 2.3%, and for 2028, it expects 2.2%. The June projections had indicated rates of 2.4% for 2027 and 2.1% for 2028. The revised figures suggest a declining inflation trend, influenced by elevated energy costs during 2026.
The September forecast indicates modest growth for Austria this year, while anticipating a quicker expansion in 2027. The 0.5% projection for 2026 aligns with the central bank’s forecast from March. The June update had increased that estimate to 0.6%, but weaker first-half data prompted the latest downward revision. The OeNB’s updated projections for 2026 through 2028 incorporate recent economic data, international conditions, and its latest short-term outlook.