VIENNA, AUSTRIA / RankWire.AI / – Austria’s central bank has downgraded its projection for 2026 economic growth following weaker-than-expected activity in the first half of the year. The Oesterreichische Nationalbank now anticipates real gross domestic product to grow by 0.5% in 2026. This is slightly lower than its June forecast, which predicted a 0.6% increase. The bank explained that the 0.1 percentage point reduction reflects the weaker economic performance observed during the first six months of 2026.
According to Statistics Austria, Austria’s economy shrank by 0.1% in the second quarter compared to the previous three months. This decline interrupted six consecutive quarters of positive growth. Despite this contraction, GDP was still 0.4% higher than in the same period last year. In the first quarter, annual growth stood at 0.8%. Statistics Austria noted that rising energy prices pressured economic output during the second quarter, adding strain to an economy that had recently emerged from recession.
The OeNB remains optimistic about conditions in the latter half of 2026, even with its full-year forecast lowered. Its short-term indicator suggests GDP growth of 0.1% in the third quarter and 0.3% in the fourth. The central bank pointed out that global trade has performed better than previously expected. Austrian exports of goods have also picked up momentum. Additionally, industrial order books and business sentiment have improved since the bank’s June forecast.
Better Growth Expectations for 2027 Lead to Upgraded Forecast
The improved outlook for the second half of 2026 has prompted the central bank to raise its projection for 2027. The OeNB now expects Austria’s economy to grow by 1.3% next year, up from its June estimate of 1.1%. Its forecast for 2028 remains unchanged at 1.2%. Austria’s economy expanded by 0.7% in 2025 after two years of recession, but the recovery has been modest, hindered by higher energy costs and challenging global conditions.
The central bank’s latest assessment also considers the economic impact of Austria’s summer drought. It estimates that the drought will reduce growth by roughly 0.1 percentage point in 2026. OeNB Governor Martin Kocher stated that industrial orders and sentiment have improved since June despite difficult circumstances. The bank highlighted that these positive developments, combined with stronger global trade, have contributed to a brighter outlook for the latter half of 2026 and the elevated forecast for 2027.
Inflation Forecast for 2026 Revised Lower
The OeNB has also adjusted its inflation outlook downward for Austria. It now expects Harmonised Index of Consumer Prices inflation to average 3.0% in 2026, compared to its June estimate of 3.2%. The central bank’s projections for 2027 and 2028 are 2.3% and 2.2%, respectively. Previously, in June, the forecasted rates were 2.4% for 2027 and 2.1% for 2028. Recent data show inflation on a downward trend after elevated energy costs pushed prices higher during 2026.
The September forecast suggests Austria will experience modest growth this year, with a more rapid expansion expected in 2027. The 0.5% growth projection for 2026 aligns with the central bank’s forecast from March. The June update had raised this estimate to 0.6%, but weaker first-half data led to the latest downward revision. The OeNB’s updated projections for 2026 to 2028 now incorporate recent economic developments, international conditions, and its latest short-term analysis.