An uptick in private consumption driven by the planned eco-social tax reform should give economic growth an extra boost, reported the Austrian Institute of Economic Research (WIFO) in a mid-term outlook report published on November 2nd. Indeed, between 2022 and 2026, Austria’s economy is expected to grow faster than the Eurozone.
Austria’s stronger-than-expected economic prognosis can be explained by various measurements the government introduced in response to the global pandemic, as well as the planned eco-social tax reform and investment incentives. Unemployment also fell more quickly than expected.
“Since the spring, economic recovery has been considerably faster than expected. The international economy sprang into action and pulled along Austrian industry,” said Dr. Josef Baumgartner, senior economist, in his article for WIFO. “Global industrial production from spring to summer was higher than production levels were from 2017 to 2019, even though that had already been a good economic phase, the best since the last financial crisis.”
An unexpected boon
The planned eco-social tax reform should push private consumption even further, because additional revenues generated by the carbon tax will be redistributed to all Austrians in the form of cash bonuses. “Almost one quarter of a percentage point of growth in the timeframe of 2022 to 2026 will come from the tax reform, which is around 0.2 percent per year”, Baumgartner told APA in an interview.
On average, the gross domestic product (GDP) is expected to make a net increase of 2.6 percent in that period, after a 4.4 percent increase this year. In 2022, experts expect growth to be 5 percent, already higher than the 4.8 percent prediction at the start of October.
After years of significant growth, experts expect growth to level out at 2.4 and 2.3 percent in 2023 and 2024, as well as 1.8 percent each in the years of 2025 and 2026.
Reported in cooperation with the Austrian Press Agency / APA.