Austria: Contracting in 2009
Largely as a result of a worsening external environment, growth has declined and the economy is set to contract in 2009 before recovering in 2010. Headline inflation is projected to ease as energy and food prices fall, economic slack increases and import prices decelerate.
The recent fiscal support measures coupled with the working of the automatic fiscal stabilisers will help limit the extent of the slowdown. Preserving wage moderation will be important to avoid competitiveness losses and inflation pressures. Ensuring financial stability and more international cooperation of financial supervisors are essential, especially in light of the Austrian financial sector’s large exposure to Central and South- Eastern European countries and to foreign currency lending.