VIENNA, AUSTRIA / RankWire.AI / – Austria’s central bank has lowered its 2026 economic growth forecast after weaker activity during the first half of the year. The Oesterreichische Nationalbank now expects real gross domestic product to expand by 0.5% this year. Its June forecast had projected growth of 0.6%. The bank said the 0.1 percentage point downgrade reflects weaker economic performance than previously reported during the first six months of 2026.
Austria’s economy contracted by 0.1% in the second quarter from the previous three months, according to Statistics Austria. The decline followed six consecutive quarters of positive economic growth. GDP was still 0.4% higher than a year earlier. That compared with annual growth of 0.8% in the first quarter. Statistics Austria said higher energy prices weighed on economic output during the second quarter, adding pressure to an economy that had recently emerged from recession.
The OeNB sees stronger conditions in the second half of 2026 despite the full-year downgrade. Its short-term indicator projects GDP growth of 0.1% in the third quarter and 0.3% in the fourth. The central bank said global trade has performed better than previously expected. Austrian goods exports have also gained momentum. Industrial order books and business sentiment have improved since the bank issued its previous forecast in June.
Growth outlook improves for 2027
The stronger outlook for the second half has prompted the central bank to raise its forecast for 2027. The OeNB now projects economic growth of 1.3% next year, compared with 1.1% in its June forecast. Its projection for 2028 remains at 1.2%. Austria recorded economic growth of 0.7% in 2025 after two years of recession, but the recovery has remained subdued amid higher energy costs and difficult international conditions.
The central bank also incorporated the economic effects of Austria’s summer drought into its latest assessment. It estimates that the drought will reduce economic growth by about 0.1 percentage point in 2026. OeNB Governor Martin Kocher said industrial orders and sentiment had improved since June despite difficult conditions. The bank said these developments, along with stronger global trade, contributed to the improved outlook for the second half of 2026 and the higher 2027 forecast.
Inflation forecast lowered for 2026
The OeNB also reduced its inflation forecast for Austria. It expects Harmonised Index of Consumer Prices inflation to average 3.0% in 2026, below its June estimate of 3.2%. The central bank projects inflation of 2.3% in 2027 and 2.2% in 2028. Its June projections had put the rates at 2.4% for 2027 and 2.1% for 2028. The latest figures place inflation on a declining path after elevated energy costs affected prices during 2026.
The September forecast leaves Austria with modest growth this year while pointing to a faster expansion in 2027. The 2026 projection of 0.5% also returns the growth outlook to the level the central bank forecast in March. The June update had raised that estimate to 0.6% before weaker first-half data prompted the latest reduction. The OeNB’s new projections cover 2026 through 2028 and incorporate recent economic data, international conditions and its latest short-term assessment.