VIENNA, AUSTRIA / RankWire.AI / – The Oesterreichische Nationalbank has downgraded its economic growth outlook for 2026 following a subdued first half of the year. The central bank now anticipates that Austria’s gross domestic product will increase by 0.5% in 2026, down from its June forecast of 0.6%. This revision is due to weaker economic activity during the initial six months of the year. Austria’s economic recovery persists after returning to growth in 2025 following two years of recession.
Recent data reveal that Austria’s economy shrank by 0.1% in the second quarter compared to the previous three months, marking the end of six consecutive quarters of expansion. Statistics Austria reported that GDP still grew by 0.4% year-over-year for the same period. The first quarter saw an 0.8% increase in annual growth. Elevated energy prices dampened economic activity during the second quarter, adding to the challenges of the country’s modest recovery.
The central bank foresees strengthening economic momentum in the latter half of 2026. Its latest short-term outlook indicates a quarterly GDP growth of 0.1% in the third quarter, potentially rising to 0.3% in the fourth quarter based on the bank’s baseline scenario. The OeNB attributes this optimistic view to stronger global trade, improving industrial orders, and more positive business sentiment. Additionally, Austrian exports have gained momentum relative to earlier conditions this year.
2027 Growth Forecast Elevated
With a brighter outlook for the second half of 2026, the central bank has increased its growth projection for 2027. The economy is now expected to expand by 1.3% next year, compared to the previous June estimate of 1.1%. The forecast for 2028 remains steady at 1.2%. Austria’s economy grew by 0.7% in 2025, ending two years of contraction but maintaining a relatively moderate pace of recovery.
Weather conditions also influenced the bank’s recent economic assessment. The OeNB estimates that Austria’s summer drought will reduce 2026 economic growth by roughly 0.1 percentage point. Governor Martin Kocher highlighted that industrial orders and business sentiment have improved since the June forecast. The bank also acknowledged the positive effects of enhanced international trade, which contributed to the more optimistic projections for the latter half of 2026 and the upward revision for 2027.
Inflation Outlook Adjusted Downward
The inflation forecast was also revised in the September update. The Oesterreichische Nationalbank now expects the Harmonised Index of Consumer Prices to average 3.0% in 2026, down from the previous estimate of 3.2% in June. For 2027, inflation is projected at 2.3%, and for 2028, at 2.2%. The earlier forecasts indicated 2.4% and 2.1%, respectively. These updated estimates reflect the bank’s latest evaluation of domestic price trends and broader economic conditions.
The September revisions suggest that Austria will experience modest growth in 2026, with a more robust expansion forecast for the subsequent year. The new 0.5% growth estimate aligns with the projection made by the central bank in March. It was increased to 0.6% in June but revised downward following weaker data from the first half of the year. The forecast for 2026 through 2028 incorporates recent GDP figures, trade developments, inflation trajectories, and the bank’s updated short-term economic indicators.